Investment ‘rules’ still in play

Although the property market is currently on a plateau, many investors believe there will be another market surge starting in 2008 and are consequently hunting for good investments now that will put them ahead of the wave.

However, says Berry Everitt, MD of the Chas Everitt International property group, there are certain factors that they need to take into account, not the least of which is a clear understanding of the tax implications of the purchase of an investment property - for their current earnings as well as from a capital gains point of view.

Writing in the Property Signposts newsletter, he says: “Much will depend on whether it will be a cash purchase or whether a new mortgage will have to be covered. And the investor should know what he or she plans to do with any proceeds of the investment.”

Before buying, the investor needs to also consider the overall prospects for the national economy and, equally important, the economy in the area in which the property is situated.

“Even when the country is in a recession, certain areas will boom because, for example, a new industry has moved in, or foreign tourists have discovered its attractions. Conversely, some areas will not do as well as others even when the national economy is growing strongly, as is currently the case.”

Everitt advises that beginners should start small, buy with a sizeable deposit and ensure that sound tenants will continue to pay off the mortgage.

“Property investment can hardly fail if the investor is satisfied with the rental return. Then, if higher interest rates or unexpected personal circumstances force a quick sale, the selling price will not be a critical issue. And if there is a big capital gain, that's the entrepreneur's reward.”

Article by: www.chaseveritt.com