How to choose a property that’s going to make you money

An increasing amount of people are realising that property is the best nest egg. Pension plans are becoming less reliable and more temperamental, so it’s not surprising that so many aren’t willing to just sit, wait and hope for the best. Although it’s not a guaranteed road to riches, putting money into property now is more likely to make you better off down the line.

Of course, this all depends on whether or not you can find the right property. How can you ensure you’re making a wise investment?

Take your time

When you’ve made the decision to buy a new home or investment property for buy-to-let, it’s understandable you’ll feel excited. But don’t let that enthusiasm act against your own better judgement when it comes to property hunting.

The first property you see might have everything you’re looking for on the surface, but seeing other properties will allow you to notice other faults that you may not have picked up on, as well as providing you with more choice. It will also give you a better understanding of what it is you’re really looking for; a property can tick all your boxes on paper, but there might be no chemistry when you go for a snoop around.

Get to grips with the finances

What are you looking to get out of your property the most – an increase in property price or the potential for high rental returns? This will differ between properties, even if they’re in the same area, and should always be taken consideration when purchasing a property.
For buy-to-let investments, it’s obviously important to have a decent rental yield. To work out the potential gross rental yield of a property, multiply the amount of monthly rent by 12 and divide it by the amount you’re going to pay for the property. For example, if you purchase a flat for £600,000 and rent it for £3,000 a month, you would multiply £3,000 by 12 (£36,000) and divide this by £600,000 (0.06). Multiply this by 100 and this gives you a six per cent rental yield. This would be comparatively good next to the Kensington and Chelsea average of 2.88 per cent, shown in data revealed by HSBC earlier this year.

Finding the right balance between what you will pay for a property, the cost of any conversion work that needs doing and the income you’ll eventually earn is essential, but good price growth is equally so. Ultimately, it comes down to your motives and how much spare cash you have, and this is exactly why you have to get to grips with your finances before looking to buy.

Know the neighbourhood

Knowledge of the area you’re looking to buy in will prove invaluable when it comes to assessing house prices and processing any assertions made by the selling agent. This is why most buy-to-let investors stick to the same area.

Properties with unusual features, such as period homes and those with unique gardens, will always be sought after and therefore are more likely to have good price growth. Keep away from run-of-the-mill properties wherever possible, unless there’s the potential for a high rental yield.

Also, consider the economic conditions affecting the area. Is there a high demand for rental properties because of a particular establishment nearby, such as a factory or a university? If this was to close, it could have a drastic impact on demand and housing prices in the area.

Use the best agent in the area

Whether you’re looking for a home to live in yourself, buying your first buy-to-let property or expanding your property portfolio, it’s important to work with an agent you can trust.

A specialist estate agent (i.e. one that focuses on a particular area and style of property) can help you with all aspects of the buying process and give you the best possible chance of seeing the most return on your investment. That includes presenting you with an array of properties that suit your requirements, helping you to make an educated and informed decision on which is right for you. If you’re not 100 per cent on your knowledge of an area, your agent should be able to fill in the blanks and provide a reliable service based around quality advice and assistance.

They can also help you get your finances in order, from figuring out what you can afford to setting your budgets, consulting with builders regarding renovation, to settling on how much to charge for rent.

A property can be many things; your home, your income, your hobby and your alternative pension. Get it right and you could be cruising down the road to riches in no time.