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Get the fundamentals right before you start investing your money

By Neil McShane

With many property investors having had their fingers burnt, is it any wonder there is a reluctance to re-enter the market? And for those who are considering investing in property for the first time, there is a justifiable nervousness about parting with their hard-earned cash. So is now the time to invest in property? Absolutely. But the fundamentals of the property must be right.

The market had been in decline for seven years, and we are finally experiencing modest, but sustainable, improvements in the market.

For larger scale investments, the market is still being driven by investors from the UK. But it is encouraging, for transactions up to a certain level, we have begun to see locally-based investors from Ireland play a more active role.

While property values are starting to increase, investments can still deliver reasonable value compared with pre-recession prices. But there are lots of things to consider before taking the investment leap.

So where to start? Well, if you have identified something you like, the opportunity must be attractive in some respects. Perhaps it presents well, or has a good tenant in occupation, or perhaps it looks cheap. If you are drawn to it, the chances are, you are not alone. So, if you really like an opportunity, the sure-fire way to get it is to pay that little bit more than anyone else. That way you know you have paid market value, or perhaps just a little more.

But have you really studied this opportunity? Have you analysed the passing rent and considered the covenant strength? Has your solicitor checked the title and identified any issues in the occupational lease or leases? Come to think of it, has the under-bidder done the same, or any bidders for that matter?

Too often, I have found myself offering on an asset, on behalf of a retained client, before having to withdraw from further bidding as the process becomes overheated.

It concerns me that many bidders do not retain a commercial property adviser and so may not be aware of all the pros and cons.

Many investors will argue that they don't need a property adviser when spending a significant share of their life-savings, and yet it is rightly inconceivable that a property would be transacted without a solicitor.

A good solicitor will provide robust advice on title and whether there are any defects, but a solicitor will not advise on value, nor is it their job. My advice to anyone who is keen to take the investment leap into the property market is to appoint an active and experienced property adviser.

You might expect someone in my line of work to say that, but property transactions normally involve a substantial amount of money and the peace of mind from knowing you have invested well has to be worth the relatively small additional cost.

Neil McShane is director in the capital markets division at Lambert Smith Hampton

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