There are three main factors to consider when buying Investment Property
Rental Yield
If you are buying a property to rent out, then clearly a high rental yield is attractive. A quick reminder on how we work out yield - take the annual rent and divide by the value/buying price. So if you can rent the property out for £500 a month that would be gross rent of £6000 a year.
And if the property is worth £100,000 then the rental yield is 6%. You might like to aim for a minimum of say 7% yield - although this can vary depending on borrowing rates at the time.
Price Bought Below Market Value
Price secured is important - and many would say the discount to value is the most important part of buying as that amount can provide good starter equity which would act as a valuable cushion against market movement. I would agree this is very important, although the yield is still more important if looking at rental .
Available Finance and borrowing rates?
This clearly makes a difference, as with the availability of finance, property prices are likely to rise. If lenders are willing to lend a high loan to value (LTV) on property then this gives a good indication that they are happy with the area and the security they provide. Money Market trends however can override these simple rules of thumb!
Borrowing rates are clearly very important; if you can get borrowing rates of 2% below the rental yields then this is obviously more attractive than if the borrowing rates are the same as the rental yields.
These three areas are all important when considering a new property acquisition.