Buying an Investment Property - A Checklist and a word on Inflation

It still amazes me how some people blindly believe what they are told by property firms.
So here are some things you should keep in mind….
1. Find out whatever you can about the property company you are buying through. What does it say about them on the Internet?
2. Do they stand to lose money if it turns out to be a bad investment?
3. Get your own valuation for both rental potential and property value. Don’t ever trust theirs.
4. Even with your own valuations, you must still do your own research - remember, lots of surveyors working for banks once thought all the shiny new builds going up 5 to 10 years ago were worth 50% more on both rental potential and value more than they are actually worth now.
5. To avoid making the same mistakes these valuers and mortgage lenders did back then, you should think about supply. If there are ten thousand more units going up locally and they are just like yours and are all chasing a limited pool of tenants, I suggest you get a text book on GCSE level Economics from your library and re-read the bits about demand and supply.
6. Visit the area!

Inflation and Property Outlook
If you don’t study history you are bound to repeat the mistakes of the past.
If you do, you’ll just make new mistakes.
I’m not sure who first said those things but looking at investment - whether investing in property or anything else – it is always interesting to look at the past.
Twenty years ago, in 1989, the Japanese main stock market index, the Nikkei, was roughly four times higher than it is today.
Since then there has been a steady deflationary trend in asset prices in Japan and despite a few short lived revivals the Nikkei stays as low as ever.

UK Inflation and Government Policy
Could we see a long term low inflation or even continuous deflation in the UK? Where are we headed on inflation in the UK?
This is an important question to ask for anyone investing in property, because as a real asset, the neat thing is that in an inflationary environment, property should go up in value.
And so, the thinking goes, it can make sense to borrow a bit to buy property because in time your loan becomes worth less relative to the capital asset, the property.
I am asking this question right now because there was a small tick up in inflation in the last round of figures (although many think this could be temporary and is simply a reflection of very fast falling prices a year ago starting to fall out of the figures.)
If we have inflation coming back, how good inflation is for property investors depends, I think, on whether the Government uses fiscal (tax or spend) or monetary (money supply and interest rates) policies to control it.
Given the weak state of the corporate sector my bet is that, whatever Government is in power, they will be more likely to cut public spending and raise personal taxes than put up interest rates.
Although this will keep a lid on property prices a bit, it won’t hurt property as much as if we had to face hikes in interest rates.
If we saw a sustained period of deflation, property prices will make headway much less fast, but will still be underpinned by lack of supply.

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