1. Always Purchase From Motivated Sellers
The first Rule for Property investing is that you want to buy property from what we refer to as motivated sellers. A motivated seller is someone who really needs to sell their property quickly.
They'll have a problem and because of that they're more flexible on the price and/or the terms of the transaction. . This is because for these type of people it's not about getting the most amount of money, which is what most sellers want by the way, it's about getting speed and certainty that this transaction is going to happen.
2. Only Ever Buy Property in an Area of Strong Demand
The second of our rules is we only ever buy property in an area of strong rental demand. Sometimes people think they should buy a really cheap property because they think it meets the first Rule for Property Investing. But if no one is going to want to rent that property, then there's no point buying it. So, it's got to be in an area of strong rental demand.
You can check this out by going online, you can see what the rental demand is in a particular area. You can also speak to local letting agents and ask them what they think the demand is like in the area. So it's about doing your research and your due diligence to make sure this is a good strong rental demand area.
3. Only Ever Buy Property That Gives You Positive Cash Flow
Out of all of the Golden Rules for Property Investing, I think this is the most important one. What this means is, at the end of the month when you get the rent and take all the other costs away, there must be some profit left over for you.
Possible Costs:
Mainly your mortgage
The insurance
The management fees
Leasehold fees
Maintenance
All the bills if it is a HMO
4. Buy Property for the Long Term
The fourth Golden Rule for Property Investing is we buy property for the long-term. Now you can make money for the short-term in property. You can buy a property, renovate it, and sell it straight on. It's called flipping property and it's a great, very profitable strategy in the right market conditions.
5. Have A Cash Buffer In Place
The last time for Property Investing Number Five is very important and it's about having a cash buffer. This is some funds put aside. It could be on a credit card, it could be in a bank, it could be someone else's reserves you've agreed to borrow in advance, just to make sure you can fix any problems that aren't covered by insurance.
Now most of the things in property can be insured against, you know if your tenant runs off and doesn't pay the rent you can insure against that. If the tenant causes damage, you can insure against that. However, sometimes things aren't armoured by insurance and it means you've got to spend a fair amount on your property to fix it and make it rentable again.
Want to know more about property acquisition, management & development? Email cjh@nicomediagroup.com & register your interest to 'The Paul Nicholson Property Summit 2019'