A property investor is a long-term investor who lives by the fact they will be substantially better off later on in life and can also pass on their heritage to their children. They are ‘property rich’ rather than ‘cash rich.’
Welcome to Connect UK’s Auction Academy – Here to answer all your property auction questions.
So, what should a typical investor look out for when viewing auction property?
1) Yield
After all, the reason for investing in a buy to let is the return you will receive and how profitable the opportunity is for you.
Yield measures the cash flow an investor receives on the amount invested. Generally, yield is calculated by dividing the dividends or interest received on a set period of time by either the amount originally invested. In a nutshell, the higher the yield, the greater the return.
2) Location
Your yield will be dependant on a number of factors with the main one being the property location. Is the location sought after? Is it up and coming? Is it near local transport links and/or local schools?
Generally, most think – the higher the yield the better the opportunity.
A desirable location always results in a higher yield and a higher capital appreciation.
3) Exit Strategy
You may be a long-term investor but knowing you have a way out if you’re circumstances change is important. There are many different types of exit strategies:
- Sell all you own.
- Re-finance to give you the equity needed at that time.
- Restructure a portfolio. Sometimes the best option of all is likely to be a mix-and-match of all of them, depending on your risk tolerance and income requirements. If you’re relying on income from your portfolio in retirement, there’s a strong argument for restructuring in some way.
The saying “buy and hold forever” makes sense if you are a long-term investor.
It is important to remember that as investors, we shouldn’t be emotionally attached to any property and should only be treated as a source of income.
Check out our other videos on ‘How to decide where to buy’ and ‘Due Diligence vs Gambling.’
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