There are many things to consider when investing in property, but the main consideration is profit, plain and simple. No investor wants to invest in a property where the double of the investment is not seen. It does not matter if the real estate investors are rich or not, they still want to see a profit.
The best investment advice is the proper selection of a property, how to use due diligence in your research and then how to run the property with as little hassle as possible. Cheap property buys are not always the best investment. This is because real estate investments require a good return. Why would you ever buy a property where there was no profit? Only because you see potential in the property in the long run. With this being a foreclosure market with high bankruptcies, a possible low ball offer on a home or apartment complex with potential to raise the rents in the future, may be a good deal.
Whether you are buying a duplex or a 23 unit apartment complex, location is still the key. If you want to buy to-let in the UK then you will look at the loan, the rent and the location. The same scenario is worldwide and will apply to buying Dubai property investment overseas or a small luxury property in Monte Carlo.
Keep in mind that location will cost you more money and thus grant you the right to charge a higher rent, unless the cost of the unit does not fit the area. Even in the best areas, you still want to look for profit.
How to compute profit
Your profit is computed by taking your costs minus your rents (provided that all the units are rented and that you have good tenants). If you have one bad tenant who is not paying, all your profit may go out of the window. Always allow a 25% allowance for vacancies. The lender will allow 15% when figuring out your loan value.
To fully understand how to compute profits, consider these items. Never ever trust an agent to give you the correct data or net sheets. Do this on your own.
-Insurance and taxes
-Management fees (optional)
-Rental insurance (optional) Due diligence What is due diligence? Due diligence is to investigate the property thoroughly. Find out if the tenants are noisy, paid up on time or have long leases. Find out why the owner is selling. Request a title report showing who owns the property and do a complete net sheet on expected repairs that are needed.