How to Know if a Property Investment is Worthwhile

Property investment can be a great way to make the most of your savings, but like any investment there can be risks and it is essential that you take your time and invest wisely. It is vital to make sure you have all of the information necessary, that you are getting a great deal and that there is strong potential in the property. There are a number of factors you can look at to figure out whether a property investment is worthwhile.

Rental Yields

Rental yields are a key indicator when you are evaluating whether a property investment will pay off. A rental yield is a percentage that will tell you how much you will earn from your property every year and how quickly your investment will pay for itself. Calculating rental yields by dividing the monthly yield by the total amount paid is a great way to compare properties and find out which is the best source of income.




Potential for Growth

Looking at a property’s potential for growth is another key part of evaluating an investment. This is often linked to area. The UK cities house price index recently reported that in Liverpool, house prices have risen by 7.5%, in Glasgow they have risen by 7.2%, in Nottingham by 6.9% and Manchester by 6.8%. High growth areas, like those above, often benefit from affordable low entry prices. Make sure you check that the price you pay is far enough under the ceiling price for the road or area for you to make money. Look at what local properties are selling for and see whether you can add value to the property.

Consider All Extra Costs

Another thing that can really affect the viability of an investment is the extra costs that will be involved. It’s important to factor these into your budget and be aware of any additional payments you might need to make. Some potential fees you should be aware of include stamp duty land tax, ground rent payments which must be paid to the freeholder, legal fees and many more. Some apartment buildings have maintenance costs, some houses may need damp treating, these extra costs can all affect a property’s profitability. All of these add up and can affect how rewarding a property investment is. Make sure you have a clear idea of the total cost of the property investment before you move forward.

Area Potential

The potential of an area is another important consideration when you are evaluating a potential investment. If an area has a strong demand for rental properties, is showing positive signs of regeneration and growth and has thriving businesses or universities then it will be a much safer bet than an area that is stagnant. Look at what kind of properties are being let out the fastest and whether any have been on the market for a long time. Try and pick a property that an area is crying out for, for example student accommodation in a town with more than one university.

Seek Out Extra Information

Doing due diligence and spending time researching your future investment is very important. Choosing to invest with an established property investment company like RW Invest is a great way to get insider information and purchase exclusive properties with proven tenant demand. Don’t be afraid to listen to advice and be cautious when it comes to choosing your first investment property.

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