If you’re thinking of dipping your toe into the property market for the first time, you need to be on your guard and understand what you’re looking to achieve with an investment.
It’s all too easy to end up with a property that isn’t providing you with the returns you desire if you don’t do your research.
As a rule of thumb, you will be looking for either yield in terms of rent from tenants or capital gains on a house you purchase and subsequently flip, or both ideally.
But what do you need to look for in a prospective property and its surrounding area that gives you the best chance of guaranteeing yourself a tidy return?
In this post, we take a look at a few of the important things you need to take into consideration when making your first property investment.
Location, Location, Location
You’ve probably heard the old chestnut – it’s all about location, location, location when it comes to buying property, and it’s true when you’re looking for property as an investment vehicle, too.
A good location is key when it comes to finding an investment property because it’s really the location that drives demand, and demand is a key determinant of the rent or price a property will yield.
Prime first-time property locations tend to feature one or all of the following:
- Growing population
- Stable employment patterns
- Good transport links
- Universities or hospitals nearby
- Low vacancy rates
- Regeneration or infrastructure investment
Function Over for Form
It’s easy to fall into the trap of looking for a picture-book first home to buy, as you can imagine that tenants or buyers have the same taste as you do.
However, it’s important to remember that you aren’t buying a property for yourself, and function will always tend to beat form where they are concerned.
That means you need to be on the lookout for those properties that aren’t necessarily pretty, but feature things like good local amenities, comprehensive internet coverage, and well-regarded schools nearby.
Numbers Need to Add Up
Yield (gross and net), capital gains, cash-on-cash return…the terms relating to property investment really start to add up when you start to think about how to calculate the returns you want on an investment.
But remember, at the end of the day, when buying a first property as an investment, you are looking for a secure and consistent income, and somewhere where the costs will be manageable, the financing works, and the long-term return justifies the short-term risk.
Red Flags
When inspecting a property for the first time, you need to be on your guard for the obvious red flags and warning signs that any prospective landlord or owner should be aware of when looking at a property.
Alarm bells should start ringing if you spot things such as dodgy wiring, shoddy cladding, signs of damp and subsidence, an ageing boiler, and in the garden – Japanese knotweed. All of these can end up being extremely costly, especially if you don’t have the contacts or expertise to thoroughly survey them before purchasing.
Supply and Demand
Finally, a basic economic fact to bear in mind when investing in any kind of property is that two factors determine the price: supply and demand.
It’s easy to become bogged down in the demand side of the equation, but supply is an equally important factor when buying property.
A dearth of quality housing can be a good thing as a first-time property investor, especially in up-and-coming areas where buyers and renters are starting to flock.
Recently regenerated areas of a city like Manchester, where Select Property has prime locations, present a perfect investment for a first-time investor.
Conclusion
It’s easy to overcomplicate things when looking for your first investment property.
But by keeping a few simple facts in mind, understanding the red flags and getting to grips with the kind of return you are looking to achieve, you can simplify things and keep the things that matter at the forefront of your mind.
