05 Jan Property Finance – Why Investment Location Is Important
Deciding on and acquiring property finance will be influenced by the viability of the investment.
Properties in sought after areas will increase in value faster and will also demand a higher rental value. In investment property value cycles; the property values in sought after locations are less affected by an ebb when the cycle slows down.
Even when they are affected, the probability that they will drop below the purchase price becomes less likely. The rate at which they increase in value usually only slows down rather than coming to a halt.
When reviewing an application for property finance, funding sources will want to see the viability of the investment. This is the case for both retail and private funding providers. Location provides key information to this end.
When considering location, your property finance provider will want your investment to be safe for both the interim and the long term. For the interim term, the rental value is what will determine the return on the investment. This is especially in terms of rental value. And demand is what will drive the rental returns.
Selecting your location carefully will ensure that you have a sound rental return. Then, as the investment matures into a long-term high yield profit.
Understanding how location influences people locally becomes relevant when investing in either commercial or residential property.
Residential Property Finance
For residential property, factors such as how the property is zoned for local schools will influence demand. Access to local shops and retail facilities will also make a significant difference. The availability of doctors, dentists and a local hospital add to the value significantly too.
Don’t forget the demographic of the local population when considering your investment. A local fitness centre will be important to younger adults and families with children, but may become redundant to an ageing population.
Again, if the population are working age and need to get to the closest city for work, transport links become a vital factor in determining the longer term factors that will influence an increase in value.
Commercial Property Finance
Commercial properties ironically fare in a similar way. White collar workers will also want to access retail facilities on the way home from work.
This kind of convenience has become increasingly important. For many people, there doesn’t seem to be enough hours in the day. Not having to make a roundabout journey to collect the bread and milk influences where people want to work.
This will feature in a good employer’s business plan and stable businesses will think when choosing a location. Business locations that offer nurseries to parents of preschool children do better as well.
Accessibility to transport routes that enable people to get home quicker will add value to the property. This is especially for businesses that may have logistics concerns in their day to day running.
Local public transport, such as trains and buses, even intercity buses play a part in the long-term viability of a commercial property. Anyone wanting to use the property may need to be able to access public transport.
Signs To Look For
Things to look for in determining the value of the location you are exploring include the following:
Firstly, the availability of high demand property. A glut of properties on the market may indicate an underlying problem that you’re not aware of, so tread carefully and be sure to investigate how much of the property type you are wanting to invest in, is already on the market.
A low supply of the investment property coupled with high rental demand will usually indicate that you are on to a good thing.
Check the distances to local amenities carefully and ensure that there are no planning issues quietly going on in the background. A motorway planned for construction through the middle of the idyllic neighbourhood in a couple of years’ time is a perfect example.
Trends To Monitor
When property values are still climbing even when the rental values are good, this indicates a strong trend. This type of trend is an excellent indicator of a good investment.
Obtaining property finance in this scenario should not be difficult. You do not want to invest in a property that will reach a plateau on resale value shortly after you have made the investment.
Low maintenance and running costs should always be considered as these will eat away at the value of your returns reducing the long-term value of your investment.
Combining these factors with the advice and knowledge of a good broker that specialises in investment property, both commercial and residential will shore up your investment tidily for the long term. Belgravia Property Finance can advise you on property investment UK-wide as well as several selected destinations worldwide.