Is this property located in a geography that you would invest in? If it’s in your patch then is it on a street you’d invest in? Remember, things can vary wildly from street to street, this is why it’s always best to have friends locally so you can utilise their knowledge and local area gossip. I’ve found out from estate agents that a certain street has a person on it, who sits outside all day in their PJs and is rude to all the neighbours and causes punch ups. Would this stop me buying a good deal? Maybe - because it says something about the area, but also about what my tenants may have to deal with, and I want a low turnover!
Also, will this area provide you what you want? i.e Capital Appreciation or strong cashflow, with high tenant demand or both? Use online portals and local agents to research/test these.
Does this deal meet your minimum criteria? Is the computer saying NO? Base everything on objectivity, not how you feel about a deal, emotions out, cold data in. Build a spreadsheet that takes everything into account, from council tax payments, insurance, legal fees, broker fees, stamp duty, refurb costs, comparables etc. It needs to be all encompassing, if you can use Excel functions to create an ‘if’ field, so if the figures stack, your sheet literally says yes. This can take away the emotion, especially if you’ve agreed a minimum criteria with yourself, that you’ll stick to. So, before making a spreadsheet, decide what your strategy and requirements are, this may take a bit of time and deal-exposure!
3. Value add
Not everyone wants a money-out deal, or a BRR. Some investors buy on a mortgage, and leave in 25% and that’s it. An investment that still generates more than the bank. If you want to grow quickly, you’ll need some money back, so you can go again, and recycle your cash effectively. The simplest way to do this is to buy cheap, refurb and remortgage or sell at a higher price. This isn’t easy, sourcing deals like this takes time, failure and persistence. IF you want to do this, then you need to buy properties that allow to you (re)add value. This could be as simple as upgrading the decor, new carpets, new kitchens/bath, or as big as loft extensions, ground extensions or even knocking the house down and building from scratch! By doing this, you secure a deal cheaper, and allow some margin at the back end.
Alternatively, you can invest passively and do absolutely no work, but still make strong returns. The choice is yours!