With so many property investment opportunities available, it can be difficult to know which ones to accept or reject. While many of the criteria for a good investment are objective, such as location, others are specific to your personal financial situation and goals. To help you make a better decision, here are five things you should consider before making an offer.
1. Know Your Financial GoalsThe definition of financial success will vary from one person to the next. Your friend may want to make enough to buy a DeLorean and live in Hampstead, while you may be interested more in earning enough passive income to let you spend time with your family and work at things that really matter to you. Once you know your financial goals, you can consider investment opportunities in terms of whether or not they can get you where you want to be. What is a waste of money for one investor can be a golden opportunity for another.
2. Analyse Cash FlowWhen you find an opportunity that interests you, analyse the property’s potential cash flow. How much has it taken in historically, and is that income sustainable or capable of growing? If it was a financial black hole for its current owner, do you have the insights and ability to turn it around and make it profitable? Many derelict properties have been refurbished and turned into excellent money makers for investors who have the inclination and resources to get them in shape.
3. Review Local Key IndicatorsLocal indicators can affect the ability of a property to give you a good return on your investment. These factors include the economy, population growth, employment statistics, and the type of housing that seems to be popular. If jobs are plentiful and people are moving into the area, buying a property to meet their housing needs could be a good investment, provided you choose the right type of property. If families are more prevalent than singles, for example, purchasing a three-bedroom home would make better sense financially than a small block of flats.
4. Review the Sale PriceOne of the biggest mistakes made by new investors is paying more for a property than what it’s really worth and then spending years waiting for the market to catch up. This is especially common when people buy off the plan. To ensure that you don’t pay too much, you can -
- Check out the previous sale price and compare the current one to local growth
- Review the prices of comparable local properties
- Look at growth trends in the area
5. Consider Its PotentialIt is possible to turn what appears to be a bad investment into a good one. Do you have the means to improve the property? Are there things you can do to increase the rental yield? Can you find the right tenants who can afford to pay a fair but profitable rental price? If there are ways to add value without draining your financial resources, the investment could be a worthy one.
About Living Smart
At Living Smart we help investors achieve better returns on their capital through investment in lucrative property development projects. Our expertise lies in identifying opportunities, securing and maximising the correct planning consent and determining the best exit.
We are flexible in our approach and tailor our investment packages to the individual needs of investors. Please contact us for a free 30-minute consultation and the opportunity to meet us and take a tour of our current and completed projects.
About The Author
With a diverse background in digital marketing, property development, sales, and customer relationship management Ben handles recruitment, sourcing, sales, and lettings at Living Smart.