Investing in Property

by Alan Forsyth

Location, location, location - known as the three most important factors when buying a property, and it is easy to see why. The location of your property dictates how much yield you get, and how much capital growth, which ultimately decides how well you do.

And yet people still get it wrong...

Most investors only consider location within the area they live... rather than asking themselves where else they may gain even better and higher returns. It may seem to make sense to invest in a location near to you - you can pop in to check on it, help fix any problems, and keep an eye on the local market better.

However, this approach to property investment could be costing you thousands, or even tens of thousands of pounds, euros or dollars in lost opportunities in the long term.

Compare this to professional property investors, who own property all around the country they live in, or even all around the world.

By asking themselves "Where can I buy property that will give me a great return?" instead of asking "What's available down the road?", they stack the odds in their favour.

Investing in property is all about the numbers; this is something I realised very early on. Forget about whether you would like to live there or whether the property is down the street from you.

Instead, what I pay attention to is:

The likely return - yield and capital growth
Buying costs and selling costs, including taxes
Cost of borrowing money, ie interest rates
How attractive the property will be for likely tenants/buyers

So how do you recognise a great location?

To build wealth through investment property, you need a location where there will be capital growth ie where the property will rise in value, which builds wealth, ultimately allowing you to purchase additional properties and build up a portfolio.

Factors that suggest growth include:

Growing, developing economy eg countries joining EU, regenerated towns
Demand outstripping supply ie more people want property than is available. This is usually caused by increased numbers arriving which could be due to a higher birth rate, high numbers of jobs created, lower prices than similar properties elsewhere, immigration laws being relaxed.
Low cost of borrowing. If interest rates are very low, people are more likely to buy, in particular for buy-to-let, as they will be confident they can cover all costs and receive good yields.

These are the reasons why UK investors have been looking overseas over the last year or so, and why international investors target developing countries and growing cities when choosing where to invest. Remember that the location of your investment will dictate how well it performs.

Alan Forsyth is a full time property investor and developer with 10 years' experience in the UK and overseas. He is managing director of www.property-investment-tips.com which offers free independent advice and tips on property investment, courses, countries, strategies, mortgages and much more - with a free newsletter every 3 weeks giving latest tips and offers to over 500 investors. Sign up today at the site for free independent advice!