Here at Clear Property Investment we believe the key to whether or not a property is worth purchasing lies in its cash flow. And that boils down to how well the market for that particular property is doing, and how well the property itself is performing.

What if you buy and you start having to pay out far more than you're receiving in rent because the location has gone downhill? Worse still, there's been a huge slump in the market for that particular type of property so it doesn't make sense to sell either.

So you're going to hang on to the property in the hope the council keeps its promise to regenerate the area, and the market for three-bedroom homes picks up.

But can you afford to? That's the million dollar question and one that has to be considered before you even think of ploughing your profits into property.

Any of our Clear Property Investment experts would be happy to give you guidance on working out cash flow. For starters, get a spreadsheet. Alternatively there are various software packages you could invest in.

Getting back to our scenario, what would you do? Start investing some cash from your own personal account and curb your other investment opportunities in an effort to prop this one up? Or would you just sell and cut your losses?

Think about future market conditions. For instance when the Council talk about regenerating the area, do they mean in ten years or two years? How much equity will you accumulate in the property over a set period? Look at employment, economic and other trends to get the most accurate predictions possible.

Here's Property Investor Rachel Barnes' top tips for finding positive cash-flow property:

  • Know what you're looking for ie what kind of return do you want?
  • Debt. Is it worth taking out a loan for a potential high-growth property?
  • Always check statistics for the area ie find the highest average property
  • Trawl the internet. The research potential is fantastic.
  • Use Google Earth. This is great for getting an idea of layout of an area, particularly if you've found the property on the net.
  • Don't be shy. Talk to agents in the area you're interested in and find out where to avoid. Try to meet face-to-face rather than via email and carry a business card with you in case a future property comes up
  • Make ‘ridiculous' offers ie far lower than asked. What do you have to lose? Statistically, the more offers you make, the better your chances
  • Seek out the ‘unusual' ie turn a former B&B into rental flats, look at putting in ‘Granny' flats.

For further info and advice ring our staff at any Clear office in Scotland.

View other news from July 2010