How To Research Properties For A Profitable Investment

First things first: when you buy a property, you need to understand that it’s an investment, so you need to look at it from an objective point of view. Too many people invest in property for the wrong reasons – they like the location and it’s the type of house they’d live in. There is no such thing as the perfect property and the idea is to look for a good property with potential.

It’s important to do your research and if it has the potential to be a good long-term investment. You don’t want to buy something just because the price looks good.

Below, I go through some steps to take before buying. Some of these might seem obvious but are vital before making any decision.

1. Location – understand the area well

When it comes to investing, any town or city up and down the country has good areas. What you want to do is to understand the individual areas within the towns and cities which show promise and potential.

If you’re not familiar with the area, you want to spend some time talking to people that do, like estate agents and letting agents.

Check to see if there are big businesses nearby, like shopping centres, popular chains stores, universities, and hospitals. These are not only convenient, but they are also good places to find potential tenants.

Transport links – Find out how far the nearest bus stop and train station is. There are plenty of people who use public transport to commute to work, do their shopping and visit friends. Close transport links will be a deciding factor when it comes to a person’s decision to rent.

Schools – How far away are the nearest schools and what grades did they receive on their recent inspection? There are plenty of parents who look for areas with good schools.

2. Rental demand & market

Is there a rental demand for the area and for the type of property you’re looking to buy? You don’t want to invest in an apartment where most people in that area are looking for large houses. A great way to check this is by talking to several letting agents in the area and listening to what they have to say.

For example, if you’re considering to let a 3-bedroom house in that area – then tell them. They might just let you know they struggle to let 3-bedroom houses in that location but 2-bedroom properties let very quickly.

By talking to a number of letting agents, it will give you a better idea of what’s hot in the area.

Research the local government. Are they making improvements to the area? If they are, it’s likely to have a positive impact in the near future. Read: buying now will mean higher value in the future!

Tip: Check out the competition online. How many other properties of this type are available and how long have they been vacant.

3. Price

This is obviously a major factor in your buying decision. Is the vendor asking for a realistic price for the condition of the property?

You can easily check this by going to some popular online portals like Zoopla, Rightmove and OnTheMarket. By going on these sites you can easily run sales comparisons and get a good idea of how much you should be paying for that area and property.

Understanding the true value of an investment property will help you gauge and determine its potential growth.

4. Understanding all your finances and cash flow

Make sure to understand all your costs including mortgage repayments, insurance, taxes, utilities and maintenance, and repairs; you don’t want to be hit by unexpected expenses. A seller may provide a lot of this information if they see an eager investor.

If you’ve done your research correctly and you’ve calculated the level of demand for such a property, you’ll be able to successfully predict your cash flow each month by working out your predicted rental price. You don’t want to be in a position where you’re paying large sums out of your own pocket.

Low-interest rate environments don’t last forever. It’s important to future proof your investment against rising interest rates. The best way to do this is to understand the type of mortgage you’ve taken out. Is it a standard rate, fix, or tracker? You can also stress test your repayments. Make sure your finances allow for spikes in interest rates and gives you the opportunity to cushion the financial blow.