One situation which has the potential to rapidly diminish profit is with an investment property which suffers from poor demand for rental or re-sale (at the desired value). In the instance of an investment property remaining untenanted, the investor would have to subsidies the mortgage payments, bills, etc. until a time where the property would be let and provide a rental income, or the property is sold. When investors experience a rental void period or insufficient demand for re-sale, the tendency is to drop the rental or sale price. This will further minimise profit and confidence in acquiring future investment properties.
How can property investment profit be maximised? By giving due consideration at the earliest stage possible, sufficient research can be undertaken to ensure that the local property market is driven by sufficient demand to minimise rental voids and to allow re-sale at a value which will return a profit.
Particularly on new-build properties, investors can negotiate a discount off the market value. This is more commonly the case with developers who want to achieve quick sales “off plan” at an early stage of construction, or where the developer has completed the build and wants to achieve quick sales on remaining properties.
There are also property investment companies offering investment properties with substantial discounts, due to their combined buying power. Investors can secure larger discounts via this avenue, compared to negotiating directly with developers.
Many investors will buy property at the current market value and rely on increasing property values over the mid to long term to generate a profit. Investors certainly have generated substantial profits by using this investment strategy, but these returns could have been far greater if the properties were purchased below market value in the first instance.
Astute investors are attracted to discounted property due to the substantial instant equity provided. A genuine 15% discount on a property valued at £200,000 would provide an instant gross profit of £30,000! Certainly a healthy profit to make from “Day 1”!
This article only briefly touches on some of the major factors when considering maximising property investment profit. By contacting local letting and estate agents, you can gain valuable feedback regarding the re-sale and rental prospects of your chosen property. For buy-to-let investors, letting agents will not just advise you on the achievable rental figures, but also if the demand for letting is for furnished or unfurnished properties, etc. Speak to as many property professionals as possible to get a wide range of feedback.
Property investment has and will continue to return substantial profits to successful investors. By ensuring that you have an investment plan before you proceed, you can ensure that all reasonable steps are taken to succeed in your chosen investment property.