With stock market investing still being too risky, property investment is an increasingly popular option these days.
A successful property investment however requires research, and planning.
We have compiled this list of key factors you will definitely have to consider before buying an investment property.
1.
Property Investment Strategy This might seem fairly straightforward, but different kinds of investment outcomes require different considerations, and you have to have these clearly set out before further research.
You might be looking for fast resale, or property flipping.
This can be the most difficult option, as you will need to have an excellent knowledge of the property market, and get a property in a location where there are many potential buyers.
As the property will most probably be in a popular location, you can expect it to be rather expensive.
You will also need to have a good timing and be aware of any potential short term and long term changes in the property market.
On the other hand, if you choose a good investment, you can make profit very quickly.
Property as a long term investment - Your objectives will clearly be different when buying property for a long term investment, for future resale for example.
You will need to be knowledgeable about potential long term developments on the property market, to buy the property in a good location.
You will generally be able to find a property at a lower price, but you can expect substantial future costs, and only long-term profits.
Buy to let Property Investments - Purchasing a rental property allows you to make profits in the first few months, and to think about potential resale in the future.
Rental properties thus offer flexible investment options, but you will need to carefully think about the future tenants' needs.
Location, infrastructure, security and social amenities need to be considered from the point of view of future tenants, just as the size and condition of the property.
2.
Location Location is probably the single most important factor when buying a property.
It will determine the purchase price, and the future of your property investment.
When investing in rental property you will have to consider the attractiveness of your chosen location for potential tenants.
On the other hand, when you are planning a short-term resale, you are predominantly looking for quick price appreciation, which can be due to new construction or economic growth in the area.
Location will also determine the property price.
If you are on a smaller budget, you can consider buying foreclosed or BMV (below market value) properties; a consideration of the best locations for these is also crucial.
3.
Research the Property Location There are some key factors to research about your future property location.
The economic situation of the area is really significant.
You should always look for a location where the economy is bound to improve for your property investment to remain viable.
Check industry, economic and development forecasts for the short and long term future of the area.
Consider supply and demand, as low availability of land and properties will place upward pressure on prices over the long term.
4.
Cash-flow Considerations To make sure that the property is a viable investment for you, you will have to consider costs, and profits.
Consider the initial purchasing price, and ongoing costs, such as repairs or taxes.
In light of the potential yields and the risk you will then be able to make a more informed decision.