FAQ 93 What are the reasons for buying this property?
Every property that is purchased should serve a purpose. The broad reasons are:
- Somewhere to personally live ( PPR)
- An Investment
Buying a PPR is principally a purchase of the heart. It is a place where it convenient to commute, it has nearby amenities, relatives live close by, it has lifestyle features which align with one\’s personal lifestyle. Sometimes there can be elements of a PPR which stray into the Investment category. These are usually secondary. Things like natural growth, ability to add value through improvement or renovation etc.
Buying an investment property is a very different matter. It\’s sole purpose is to generate INCOME or CAPITAL GAIN or both. It can be argued that if a property does not provide either OR has the potential to provide either then it is not an investment.
Some factors not to consider when buying an investment property
- It is nicely decorated.
- the garden is lovely.
- the real estate agent told me it was a good investment.
- it is cheap.
Some reasons for buying an investment property
- the numbers demonstrate either a capital gain or an income or both.
- there is potential to manufacture growth.
- there is potential to manufacture income.
When an investment property is purchased it should be as per a written investment plan. If the plan states that a property which will deliver a capital gain is needed ( through natural growth and manufactured growth) then this type of property that should be purchased.
Michael & Sara
Ultimate Coaches
