You’ve heard the old cliché, right? The one about property being the easiest investment on the market? Well, to some degree, there is an element of truth to the story. Property can indeed be a very profitable investment. The thing is, you have to cover a lot of bases to make sure you get it right. Otherwise, your investment will fail to get off the ground and fall flat.
The question is, then: ‘how do you make sure your investment property makes money?’ There is no easy answer to this question because there is a lot of variables in play. However, you can manage these variables if you look for the right features. Potential buyers or renters will pay a lot of money for a property that has everything they need, which is why you need to think like an investor. With that in mind, here is a list of features that make a property profitable.
As the seller, you want to recoup as much money as possible. But, as the investor, they want to save money. It is a difficult dichotomy that is hard to manage, unless you can offer lower taxes. In a weird twist, investors will pay more money upfront for a property that includes lower taxes. The reason: they don’t have to pay more in the long term. If they plan on living in the house, they will recoup a lot of money from paying fewer taxes. The same goes for people who want to rent. They will pay more in rent if they have to pay less in property tax. And, from your point of view, it doesn’t make a bit of difference. Before you invest, make sure you inquire about the taxes. After all, you might have to pay for them if you can’t find an investor or renter.
Ready To Move
Investors, quite obviously, want to move into the property as soon as possible. As a result, they won’t pay over the odds for a house that needs a lot of work. There is one main reason: the money. They clearly don’t want to pay as much money upfront if they have to spend a fortune on restoration. Instead, they will bargain over the asking price to save money for the future. From your point of view, this is money that could be in your pocket. So, you need to be proactive and do the work for them. Yes, it will cost you a lot of money, but it is money you can recoup. A property that is ready to go will charge much more than one that needs a lot of work. Before you start, take a look the most popular property designs and keep them in mind.
Good Schools Nearby
Lots of investors will have a family, which means they have kids. As parents, their kids come first, and they will be on the lookout for schools. Okay, so a school might not be your problem. After all, what can you do about moving a good school into the area? Not much, but you can think about it before you invest. Any property next to a good school or schools is much more profitable. Even if it isn’t as nice, parents won’t mind. They are much more willing to spend money on a property than ruin their kid’s education. Proximity is essential because a modern family is busy and doesn’t have time for a one hour school run. When it comes to buying a house, take a look at what the local schools have to offer.
This is an obvious one. Potential buyers don’t want to move into an area full of crime. The conventional wisdom, and rightly so, is that they will be a victim. After all, crime doesn’t discriminate. The crime rate is a huge part of investing because it will be the difference between a sale and a white elephant. Whether you like it or not, most buyers won’t invest if they don’t feel comfortable in the area. It doesn’t matter if you pick up the house for cheap and sell it at a reasonable price: no one will be interested. The only time it might work is if the area is incredibly popular or it is up and coming. But, if you don’t live in London, it is rarely the case. Be wary of any investment property in a bad area. In fact, you are better paying more for one in a good area and taking the hit. Excuse the pun.
Give Them What They Want…
Buyers are particular, which is why you need to hit every criterion. First of all, start with the type of property. What is most popular in the area? Are people more interested in a new condo launch or do they prefer a beach house? Are flats and apartments more en vogue or is an old school house back in fashion? These are all questions you need to answer beforehand. If you make the wrong choice, you may find you have own a property you can’t sell. And no one needs to tell you that that isn’t very profitable. Next, look at what people want in their house. A conservatory, for example, is popular in some areas but a pool is more popular in others. What you have to do is figure out which is more popular and install it for the sake of the investor.
But Don’t Spend Too Much
Adding a conservatory is a great idea if you can make back the money. One of the biggest mistakes in investment property is speculating to accumulate. Sure, you have to spend money to make money. But, you should never spend money you can’t make back from the sale. So, if a conservatory costs $25,000 but only adds $20,000, it isn’t worth the hassle. Getting the numbers in order is a huge part of making your investment profitable. When they don’t add up, you lose money.
Gone are the days where you can sell a house without the buyers knowing all the details. Thanks to the internet, they can research the house and have all the information before the viewing. That means they know everything from the local house prices to the neighbours. Neighbours are a big deal because someone has to live with them, and it might be for a very long time. To a degree, it doesn’t matter to you how they act because you don’t live there. But, it should matter more because you do have to sell the property. That is why it’s important to research the property as if you do want to live there. You will find out a lot about the local area, information that could be critical. If the neighbours are noisy or rude, for example, stay clear. Buyers won’t buy if they don’t like the people they have to live next to.
Permits And Development
Don’t just think about the short term – think about the long term, too. The long term future of the property will affect you in a variety of ways. For instance, it could make you a lot of money as investors are willing to pay more if they can develop. If you aren’t in the developing trade, you can take the money and run without a second thought. Or, you might think about developing the property yourself. It could be something as simple as adding on a small annex for more space, or it might be something a lot bigger. Regardless, you will need a permit before you decide on which option is best. Any development that isn’t in line with the rules and regulations might end up being bulldozed. It sounds dramatic, but it has happened in the past. The local authorities won’t allow it, especially if a neighbour snitches. Your best option is to secure the permits beforehand to avoid any complications. Or, enquire as to whether a permit can be secured. That way, you can market the fact when you put the property up for sale.
Finally, take note of Mother Nature. Sometimes, she can be a harsh mistress and very ruthless. Without a second warning a flood or a strong gust of wind can decimate a property. At the least, it can do a lot of damage. For obvious reasons, investors are too excited about this fact, which is why they won’t invest. Would you want stand in three feet of water while cooking the dinner? Of course not, and that is why you need to consider Mother Nature in advance. Look back at the history of the properties to see if they are vulnerable. If you aren’t sure, think rationally. A property on a hill isn’t going to flood as the water will drain downwards. Sometimes a little bit of critical thinking is all it takes.
There you have it – nine thinks you should consider before you buy any investment property. There are by no means the only things you should consider, but they are a good start. In the end, they could be the difference between a debt or a nice profit.