A Guide To Picking The Right Home
Before you rush into a property purchase, use our foolproof guide to assess whether it is a wise investment.
It's like being asked to marry someone you've only just met. You turn up at the property, spend a couple of minutes in each room being whizzed around by the estate agent and then are expected to make what is likely to be one of the biggest financial decisions of your life.
In an ideal world, you'd be able try out the shower, sleep in the bedroom, cook in the kitchen and invite the neighbours round for a cup of tea and good gossip. You'd get to know the property, expose its secrets and explore its flaws before you committed yourself forever.
But in a market where prices are rising by around £50 a day on average, this simply isn't possible. Hesitate, and it isn't time you lose. It's location, bedrooms and gardens, as properties which were once affordable slide out of your budget.
In such conditions, it's easy to feel pressured into a property purchase. However, with opinion divided about there's a crash around the corner, it's vital that you pick a property that will hold its value, whatever happens to the market. So whatever you do -- and whatever the estate agent says -- don't be tempted to rush in.
Make sure that, before you set foot in that door, you are armed with knowledge of what does and does not make a good property investment. Here's a quick guide on what to look for:
Most buyers try assess whether a property meets their needs today. Savvy property investors go one step further and consider whether it will meet their needs tomorrow.
After all, according to Abbey, it costs nearly £16,000 to move house nowadays. The potential to increase a property's square footage by adding an extension or converting a loft is therefore likely to prove cost-effective over the long-term.
And best of all, it can also add thousands to the price tag. Here's a list of the 10 biggest value-adding home improvements, according to estate agents.
Average Value Added
1) Loft conversion
2) Add an extension
3) Build a conservatory
4) New kitchen
5) Add central heating
7) New bathroom
9) Resurface the driveway
10) Add decking to the garden
Source: GE Money
To some extent, the investment potential of any property will depend on its location. Ask yourself: what type of person will want to buy this property when I come to sell it?
If you're a young professional buying a family home, for instance, take into account what would be important to a family (such as proximity to good schools or a spacious garden) when deciding what to offer ---even if these priorities are not top of your own list.
Do your research. Speak to the neighbours and ask them why they like living there, and visit www.upmystreet.com to find out about local crime rates and the performance of the local council.
Top 10 most desirable counties
Source: Legal & General
Buy To Let
Since Britain has become a nation of landlords instead of shopkeepers, it has become essential for any property hunter to assess the buy-to-let potential of any home, even if they plan to live in it themselves.
Buy-to-let investors have played a key role in the 190% rise in house prices that we have seen over the past 10 years. If there are any restrictions on renting out your property, this may well affect the price it can command when you come to sell it.
Look at whether the property is in an up-and-coming area. Are prices expected to rise in that postcode? If so, there may be increased competition from buy to let investors right now, and prices could actually be over-inflated. Furthermore, if there is not a significant rise in prices in the future, the buy to let investors may suddenly decide to jump ship and flood the market with properties.
It seems to contrary to logic, but my advice would always be: try to avoid hotspots unless you are certain you are in it for the long term and can afford to see out any short-term dips in the local market.
You can still benefit from the buy-to-let boom by buying in an area which has an established, steady rental market because, for example, it is near a university or has good transport links to a city centre.
The UK's five property hotspots in 2006:
Average Price 2005
Average Price 2006
% Annual Price Growth
Stoke & Stafford
Source: Birmingham Midshires
The more people you get to give their opinion of the property, the better. Abbey claims a quarter of all first-time buyers now ask their parents to accompany them on property viewings. You may not be able to live with them, but that doesn't mean you should try to find a place to live, without them.
Finally, try not to get emotionally attached or make any firm plans until your solicitor has carried out all the necessary checks and you have seen a Homebuyers Report from the surveyor.
You might have found your dream home -- but if it's a terrible investment, when you come to sell it, that dream could well turn into your worst nightmare.
Donna Werbner is Deputy Editor of Your Mortgage magazine.