Top Tips to Buying an Investment Property to Improve and Sell for Profit

Property market (Photo credit: Alan Cleaver)

There are a number of ways to invest in property. You could purchase a buy-to-let in an up-and-coming area, rent it out to cover the mortgage while its value increases and then sell it on for a profit. Alternatively, you could buy a property off-plan and then sell it at its increased market value when it’s completed. Or, if you’re ready for a project and have the time, energy and ability to cope with stress, you could buy a property that needs work but has bags of potential and sell it for a substantial profit. This method of property investment is risky and requires a lot more involvement than simply purchasing a house or apartment but, if planned and executed well, you could be rewarded for your efforts with a hefty return on your investment. Here are our top tips to finding and buying that perfect development property so that you can start making money!

Go to a property auction

Many rundown homes are sold at auction so it’s a great place to snap up that perfect development property. Plus, buying at auction avoids the lengthy property purchase procedures, which can be costly both in terms of time and if it falls through at the last minute. When that hammer falls, the property is yours. To find out when an auction is occurring, speak to a local estate agent or check the property pages of local newspapers.

View a potential property first - and do your research

Whether you’re buying through an agent or at auction, it is essential to view the property first and thoroughly examine it. Consider taking a builder, architect or surveyor with you to figure out just what will need doing, how much it will cost, and how much you could possibly make. Using software such as the Cordell Estimator V5 can help you estimate total project costs. If you decide to bid, research the asking prices of properties on the market in a similar condition so you have an idea how much it’s worth.

Check the legalities

There are certain legalities which could affect the value of the property and what work you’re permitted to carry out. For example, if the building is listed there are a number of constraints on what changes you can make.

Making financial arrangements

If you’re buying at auction, you generally need a 10% deposit to be paid on the day, with a grace period of 28 days to come up with the remaining funds. Whatever you do, don’t buy a property at auction without having secured a mortgage if you need one. If you can’t find the rest of the money not only will you lose the property but you’ll also forfeit the deposit you’ve handed over.

Securing a property

If buying through an agent, the process should be familiar to you. Buying at auction is a different kettle of fish. It can be daunting but just remember not to go over the figure you have in your head from your research or you’ll risk placing yourself in financial difficulties. If you’ve done your homework and keep your nerve, you’ll hopefully emerge with an investment property with plenty of potential!