Learning in navigating auction properties allows you to open opportunities for investors. This article explores tips for property investors and traders. For investors viewing auction property, it’s essential to consider factors that align with long-term investment goals. Property investors prioritize assets over cash and aim for long-term financial security and inheritance for their children. What factors should they consider when viewing property?
1. When investing in buy-to-let properties, the yield is a crucial factor to consider.
Yield measures the cash flow an investor receives on the amount invested, with a higher yield indicating greater profitability. It’s calculated by dividing the dividends or interest received on a set period of time by the amount originally invested.
2. The location of a property is a crucial factor in determining its yield.
Property investors should consider whether the location is desirable or up-and-coming, and whether it’s near local transport links and schools. A higher yield is often associated with more desirable locations and better capital appreciation.
3. Having an exit strategy is crucial for long-term property investors, as it allows for flexibility in changing circumstances.
There are various types of exit strategies to consider:
- Selling quickly is an option to consider.
- Consider refinancing to access equity as needed.
- Portfolio restructuring may involve a mix of residential and commercial properties to align with risk tolerance and income requirements. This approach can be particularly useful for investors depending on portfolio income during retirement.
For long-term investors, the saying “buy and hold forever” can be a wise approach. However, it’s essential to remember that as an investor, properties should be viewed solely as a source of income, and emotional attachment should be avoided.
When viewing auction property as a trader, the ultimate goal is to purchase at a low price and sell for a profit. For traders focused on flipping properties, it’s crucial to look for specific features that indicate potential for profit. What should you consider when searching for the perfect flip?
1. Location is a crucial factor to consider when searching for a property to flip.
One common saying is to “buy the worst house in the best street.” Every property has a ceiling price, which is the highest price a house can sell for in the area. Comparable properties sold in the area can provide insight into this price.
2. The amount of work required to add value is a critical factor to consider.
What level of value do you aim to add?
- Level 1 involves interior redecoration and may include clearing the property, deep cleaning, and minor repairs.
- Level 2 involves room refits, including the installation of a new kitchen and/or bathroom, as well as the tasks listed in level 1.
- Level 3, there is an opportunity to maximize the property’s value through the addition of an extension or conversion of the loft. These strategies increase the property’s interior space and overall value.
3. Access to expert advice and assistance is available.
When viewing a property, it’s crucial to have a clear budget in mind and set aside funds for unforeseen expenses. Consider your timeframe, as once the gavel falls, you are the legal owner and responsible for insuring the property. Determine if you will do the work yourself or hire contractors, and consider seeking assistance from family or friends. It’s also important to obtain multiple valuations once the work is complete and weigh up your selling options. With careful due diligence, you can remain in control and maximize profit margins.
Property Investor and mentor with over 24 years experience.