3 Things to Know About Investment Property For Sale

When you see investment property for sale in your area, you may see only the potential for profit and a chance to start drawing a second income on rental fees. However, investing in a property is a huge responsibility that won't always yield an immediate return, or at least not a large one. Buying at the right time, when prices are low but due for a bounce back, is just one factor. Your investment property may also need repairs down the line or there may be unexpected changes to its value. Here are three things you should know before you take the leap and invest in a piece of property.

1. Property Value Usually Increases, But Not Always

Most of the time, buying property gives you the chance to build equity and draw a rental fee income if you don't live in the space. However, the real estate market can be fickle and you may end up investing in a property that actually decreases in value. Even if the market as a whole doesn't drop, the neighbourhood in which you purchase a property may take a turn for the worse. Before you invest in property, prepare yourself for the possibility that your property may lose value. Be ready to hold on to the investment for many years to ride out property value fluctuations.

2. Location is Important

The state of the overall real estate market is important when making an investment. If you can pick up a home or commercial space when the market is down and the property is in foreclosure status, you can pay much less for the property than you will be able to sell it for down the road. However, the location of your investment is also very important. If you purchase property in a neighbourhood that is currently at its peak in value, you won't be likely to turn a profit in the short term. However, if you buy in an area that is just beginning to increases in value, you can turn a larger profit in a shorter amount of time.

3. You Need to Research Comparable Rentals

The primary reasons for buying investment property are to either fix it up and immediately resell at a profit, or maintain the space and charge rent to tenants. If you plan to hold on to the property and pull a rental income from the space, research comparable rents in the area. You want your potential rent to exceed what you will pay in mortgage expenses each month. This allows you to yield an immediate return on your investment, and it also gives you some funds to use towards any unexpected repairs or needed upgrades. Without proper research, you may aim to charge more in rent than the local market will allow for and wind up disappointed.

Other Considerations

While you can earn a few thousand pounds on rental fees tax free as long as you also reside in the property, if you don't live in your investment then all of the rental income is taxable. Even if you do live in the property yourself, any rental income in excess of the few thousand granted tax free will be assessed the taxes dictated by your tax band. While you can deduct some of the expenses associated with your rental property, you will still end up with a tax burden as the result of your rental income. That being said, what you pocket will be more than the taxes you pay, making property investment a viable way to grow a nest egg.

Investment property for sale can translate to an additional income stream, whether you turn the space into a holiday rental or full-time rental space. Since real estate generally outpaces inflation, you are more likely than not to be able to cash in your equity for a big return down the line as well. That being said, investing in property entails new responsibility, which may include hiring a property manage, maintenance professionals, and dealing with rowdy tenants to cause damages to the building or its interiors. When in doubt, consult with a financial planner and real estate agent in your area prior to making an offer on a property.

Sam Jones reguarly advises his readers thinking of investing in property to get more helpful information and advice on the matter at the following website http://www.uswitch.com/investments/property-investment/