4 Warning Signs for Your Next Investment Property

Contrary to popular belief, property investing isn’t without its risks. Sure, it’s a completely different game to stocks and shares, but that doesn’t mean there isn’t a huge margin for error.

On the contrary, with the authorities tightening up on tax regulations concerning buy-to-let landlords, choosing the right rental property is more important than ever.

Bearing this in mind, if you are on the hunt for your next investment property, here are four warning signs you should adhere to.

Are There Lots Of Similar Properties Available For Sale?

If there are, there is likely a reason for it. When it comes to investment properties, you want to invest in an area in high demand. By definition, this usually means very few properties are available for sale.

Oversupply is a real danger when it comes to property investing. Not only will it make it harder to find tenants, but it will also put downward pressure on rental prices. And, when it comes to all of your other property expenses, such as furnishings and even insurance, this is exactly what you need to avoid.

Ultimately, you are dicing with the possibility of falling into negative equity and risking low monthly returns.

Have Rental Prices Remained Flat Or Fallen In Recent Months?

If they have, it’s a sign of a lack of demand for rental properties in the area. This is a real danger for any would-be investor.

Of course, there will always be areas where rental prices are flat or falling. However, if this is the case, you must be very careful about investing in the area. Sometimes, it might be for a completely innocent reason; perhaps, as an example, this is an area where home ownership happens to be more common. Usually, there is a more obvious reason behind plateauing rents, and it is crucial that you find out what this is before making an offer on a property.

Are There Lots Of Properties Available To Rent?

Similarly, if there are lots of properties available to rent, it’s a sign that there is an oversupply of rental properties in the area. This is a real danger for any would-be landlord and again increases the possibility of the dreaded negative equity issue we have already discussed.

Of course, there are lots of areas with an oversupply of rental properties for completely acceptable reasons. This is often the case in university towns and cities, where there is a constant turnover of students.

However, suppose you are looking to invest in a buy-to-let property. In that case, you need to be very careful about investing in an area with an oversupply of rental properties. Not only will this make it harder to find tenants, but it will also put downward pressure on rental prices.