1. Yield. After all, the reason for investing in a buy to let is the return you will receive and how profitable the opportunity is for you. Yield measures the cash flow an investor receives on the amount invested. Generally, yield is calculated by dividing the dividends or interest received on a set period of time by the amount originally invested. In a nutshell, the higher the yield, the greater the return.
2. Location. Your yield will be dependent on a number of factors with the main one being the property location. Is the location sought after? Is it up and coming? Is it near local transport links and/or local schools? Generally, most think the higher the yield the better the opportunity. A desirable location always results in a higher yield and a better capital appreciation.
3.Exit Strategy. You may be a long-term investor but knowing you have a way out if you’re circumstances change is important. There are many different types of exit strategies:
Sell at short notice.
Re-finance to give you the equity needed at any particular time.
Restructure a portfolio. Sometimes the best option is likely to be a mix of residential and commercial properties, depending on your risk tolerance and income requirements. If you’re relying on income from your portfolio in retirement, there’s a strong argument for restructuring in some way.
The saying “buy and hold forever” makes sense if you are a long-term investor.
It is important to remember that as an investor, you should not be emotionally attached to any property and should only treat it as a source of income.
Traders viewing auction property
As a property trader, your ultimate goal is to add value and sell for a profit. This is where the old saying ‘buy low, sell high’ originates from.
If you’re looking to flip a property, then you are a property trader, not an investor per se. So, what do you need to look out for when searching for the perfect ‘flip’?
Have you heard the saying buy the worst house in the best street? Every property has a ceiling price. A ceiling price is the top price a house would sell for, in the area. We know this price by looking at comparable properties sold in the area.
2. Level of work needed. How much value are you looking to add?
Level 1: interior redecoration. This level would include some or all of the following: clearing the property, deep cleaning and some minor TLC.
Level 2: room refits. This level would include having to refit a new kitchen and/or bathroom as well as some or all of the points in level one.
Level 3: this is where we can really maximise the property’s value. Here we would add an extension or by converting the loft. These ideas would increase the interior space of the property thus adding value.
3. Expert advice and assistance available to you
Have a clear budget in your mind and be sure to set aside a budget for unforeseen circumstances or “miscellaneous.” What is your timeframe? Remember when the gavel falls, you are the new legal owner and the property is at your insurable risk. Are you doing any of the work yourself? Do you have family or friends that can help with certain aspects? How much of the project will be completed by getting the contractors in? Do you have contact with any reputable contractors already?
These are all points that you should consider when viewing a property as all of these key thoughts will help you evaluate if a property is profitable.
Once the work is completed, be sure to get numerous valuations and weigh up your selling options. The key point to remember is that you are in control at all times. Do your own due diligence and you will be able to maximise your profit margins.
To learn more on buying and selling through auction, successfully, join Connect UK Auctions – Auction Academy today.
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