This is our second article in our 4 part series that will show you how to use the current property market conditions to make immediate profits, create positive cash flow and also how you can reduce your overall risks by using sensible strategies.
OK in this article, we explain why you should be focusing on rental income to generate you positive cash flow month on month so you can still make a profit even if property prices are falling.
There can be no doubting that the UK property market is going through a tough time and that property prices are slowly falling in many areas. If truth be known, no one can really tell what will exactly happen in the future but even though you cannot control what happens to the property market, you can make sure that you make a profit from your property investments and here is how.
With buyers becoming very nervous about buying and mortgage lenders being very strict on who they will lend to, this means that many people (especially first time buyers) will not beable to afford to get onto the property ladder. However, if people are not buying they will rent instead until conditions improve. And with this in mind, we fully expect rental demand to increase over the coming months as many choose to rent and wait until property prices fall or until the credit crunch eases.
This extra demand, along with falling house prices means that rents should slowly increase and rental yields(rental returns) will be more favourable. This will create a great opportunity for property investors to focus on buying properties and targeting certain tenants where their investments will generate good positive cash flows month on month. This is a very powerful strategy to focus on in a falling market because no matter what property prices do, you are still making money from your investments and you know that in time, conditions will improve and property prices will rise once again.
But this is only half the story! If you are going to focus on this strategy, you must have a good understanding of the tenant market and understand the main tenant types that dominate the market. There are 5 main types of tenants and each one will have their own requirements for a property and preferred locations within a town or city. The 5 main tenant types are as follows;
Key Workers; Such as Teachers, nurses or doctors
Now this is the important bit; In order to make sure that you let your property out quickly, maximise rents and minimise void periods, it is important that you buy the right property in the right location for the right tenant. It is also important to analyse where the highest rental demand is for a location and then satisfy that demand with what the market is craving. For example, if you want to target key workers, you should buy properties close to local schools or hospitals and buy a 2 bed flat or small terrace house that could accommodate possibly 2 tenants as these tenants like to share to save on costs.
If you are targeting the student market, it is important that you buy a property that is located close to the university campus and focus on buying a 3 or 4 bed terrace property or converting a property to accommodate 5 or more students.
So before you buy any properties, make sure you understand the local tenant market fully, and buy the right property in the right location for the right tenant.
Another way that you can increase rents for each of your properties is to offer properties fully furnished. A fully furnished property will always command a premium in rent because a tenant can literally move into the flat and not have to worry about buying furniture etc as it is all there.
This concludes our second article in our special 4 part property investment strategy series. One of the key elements of successful property investment is to focus on rental income and focus on generating good positive cash flows from your property portfolio. So no matter what happens to property prices, you can be sure that month on month, your property investments are making you money.
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