Few property experts would disagree that the industry has become more difficult to profit from than it once was.
Life as a landlord has certainly changed from changing tax laws to abolishing rental fees.
Nevertheless, it’s not impossible.
In fact, only recently, a property television show documented the lives of individuals attempting to make a living out of the industry. Suffice to say, they all made a profit.
It can feel quite daunting if you’re starting on a blank canvas, though.
We have therefore put together today’s article, which looks at some key signs to look out for when buying your first investment property.
How have rents in the area performed over the last few years?
The very worst thing you can do as a landlord is buy in an area where rents are plateauing. Particularly with all the governmental changes over recent years, you need to know that you’ll at least be protected by rising rents.
Bearing this in mind, if it’s obvious that things have stagnated over recent times, you need to investigate. Look at the local market as a whole and see if there is potential in buying there.
Are there any planned developments in the area?
If you’re looking at an area set for regeneration, this can be a fantastic opportunity. However, you need to make sure that the regeneration is actually going to happen.
There are so many examples of regeneration schemes which have been talked about but never actually materialised. Therefore, you need to be sure that the area will see an influx of new residents.
At the same time, what if umpteen other properties of a similar standing are poised to be built? At this stage, supply might outstrip demand, which reverts to the first point we made regarding rental levels.
Are there any other costs that you will have to cover?
Gone are the days when a property purchase is just about the one-time fee itself. From stamp duty to landlord insurance commitments to dreaded service charges – there’s a long list that you need to be aware of.
Of course, this is the reality of the situation, but you must factor these costs in before you make an offer. There’s every chance your yield will be turned on its head if you haven’t accounted for each little fee that’s about to come your way.
The good news is that not all purchases will involve these fees. For example, some won’t have any ground rents or service charges, while other purchases might even be exempt from stamp duty.
What is the local market like?
You might be looking at a particular postcode which seems relatively affluent. However, it’s always worth investigating a little deeper.
In some cases, there might be several problem properties which are dragging the average price down.
In other instances, a glut of properties might come onto the market, which will only drive prices lower.
Therefore, it’s essential to do your research and ensure that you understand the local market before making a purchase.
It’s more crucial than ever to pay a fair price for an investment property – you don’t want to fall into a negative equity trap.