Thinking of the three principle property investing strategies, we could ask a series of questions like these:
If our strategy is to buy and hold property for income:
- Am I paying too much for the property?
- Will I be able to let it once I’ve bought it?
- Will I be able to obtain the rent I need/have budgeted for?
- Will there be a positive cash flow?
- Will capital values rise in this location, or could they fall?
- What happens to cash flow if interest rates go up?What if voids are more frequent or longer than I budgeted for?
If our strategy is to buy and hold property for equity:
- Am I paying too much for the property?
- Am I buying in an area where capital values will rise?
- Will I be able to let it once I’ve bought it?
- Will I be able to obtain the rent I need/have budgeted for?
- Will there be a positive cash flow?
- What happens to cash flow if interest rates go up?
- What if voids are more frequent or longer than I budgeted for?
At first glance the questions for buying and holding for income and equity look very similar but they will have a different emphasis; for buy and hold for income the principle concern will be cash flow; for buy and hold for equity it will be the prospects and likely rate of capital growth.
If our strategy is to buy and sell property for quick cash we should start by asking:
- Am I paying too much for the property?
- Am I confident that I can refurbish within budget or are there problems I don’t yet know about?
- Will I be able to sell it quickly and easily when I have finished?
- Will it achieve the price needed to make a good profit?
Most of these questions are self explanatory and will minimise a lot of the “risk” associated with property investing.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, Author & Property Investor
