Finding the right property deal for you will largely depend on your personal strategy. Whether you are looking for quick, steady cash flow, or making larger capital gains on a long-term investment, deciding on your personal strategy will help you identify the right opportunities for you. There are however some things you should always consider before you make your investment. Below are a small selection of our top tips:
How accurate are your calculations?
Before viewing any potential investment, calculating the different fees you will have to pay when purchasing the property will help you set realistic goals and prevent snowballing costs as a project progresses. Some key costs to consider and budget are:
- Refurbishment costs – If you are purchasing a property to renovate before selling, planning the refurb meticulously is key to avoiding costly surprises later down the line.
- Legal fees
- Stamp Duty (After the Stamp Duty holiday)
- Surveyor fees – What level of survey is required? For older properties a more in-depth survey may be preferable.
- Sourcing fees – Researching property sourcing agents before selecting one is key to ensuring you are getting a good deal. A good agent should have plenty of examples of deals they have successfully sourced in the past. Preferably, a VAT Registered souring agent like Modus Academy will be the most reliable for getting a good deal.
- Rental Return – Once you have chosen your property, you should aim to set rental rates to be 125% of the mortgage payment. This allows you to safely maximise your investment and cover all your fees.
Top cost calculation tip – Overestimating costs is always better than underestimating! Having budget to spare can help cover any unexpected issues.
Buy & sell for a good price from good people
Check the market value. Buying at the right price will give you more room for refurb and development costs, increasing your ROI should you choose to sell. You do not want to put more in than you can get back out. Finding a seller who is looking to progress quickly can help enormously with this, providing you with the motivation to offer you a good price. If you are offered a fair price, attempting to gain discount could disadvantage you. Pushing for discounted rates could drive the sale away from you and towards someone more than willing to pay the asking price. However, if a price seems too good to be true approach with caution.
Check the market demand
Purchasing a property outside of high traffic areas could increase your void periods between renters and could cost you. Although higher traffic areas tend to demand higher prices, it is still possible to find a good value property with plenty of potential. Paying that little bit extra at the start can make a big difference in the long run.
Can you add value easily to the property?
This is an important consideration as you look at potential investments. Whether you add value through a refurb, extension or through a conversion. The key is to spend wisely to give you the best possible return on investment. Sometimes turning a four-bedroom house into the three bed with three ensuite bedrooms will generate a better return than a standard four bed.
At Modus Accountants property business is one of our specialist areas of support. From all your standard accountancy services like; bookkeeping, VAT, payroll, and end of year accounts, to helping you source your next investment property, we can do it all. Interested in finding out more? We are currently offering free business strategy sessions to help propel your business through 2021 and beyond. Register for your free session here.