Whenever I am looking to buy, whether in UK or Overseas, I always think about my exit strategy, even if plan to hold onto the property for 5 years or more.

I always want there to be a large number of local buyers - and if there is not I always ask why not?
This will be down to either:

The fact they do not want to live there - which is clearly a risk for potential capital growth
They cannot afford to live or invest there - again a concern for future capital growth and exit strategy

They do not have an investing culture - less of a risk if other national or international buyers can fill this gap.

So for example if are buying in a low value area, for strong rental yields - and locals are not buying, you want to be sure there will be continued national or international demand.

If are buying in an expensive resort Overseas - and no locals are buying, who will provide your exit strategy?

This is always a key question to ask regardless of where you are buying.

I would always recommend developments where locals provide the majority of buyers - we have recently recommended developments in Poland and Czech Republic where the locals have snapped up over 70% often a full year before completion - that is a great sign of strong local demand and local affordability - is a few years since the UK enjoyed that sort of demand!

In the UK - I always again target areas with strong local demand - so less competition for rentals, and a clear exit strategy.

As highlighted on the Deals newsletter recently, the 2008 Demographia International Housing Affordability Survey recently highlighted Durham and Middlesbrough as the most affordable places in England with property prices twice as affordable as the national average - so clearly excellent room for further growth over the next 4 years in these parts of the world.

These should be questions you ask before committing to any investment:

Who else is buying here?

Who is likely to buy my property from me in the future?

Who is likely to rent my property?

Fundamental questions - if you are unclear on the answers - then do not buy until you are!

For example if the answers are:

Who else is buying here? - All UK Investors

Who is likely to buy my property from me in the future? - Maybe an investor or holiday maker?

Who is likely to rent my property? - Hopefully holiday makers

This does not give great encouragement that will see strong capital growth or rental demand to me.

If the answers are:

Who else is buying here? - 70% Locals/30% Investors

Who is likely to buy my property from me in the future? - Local demand outweighs supply and salaries are increasing by 10% per annum.

Who is likely to rent my property? - Local market - there is a shortage of good quality of housing for the rental market.

Does that sound like a better investment prospect? It does to me, as there appears to be a clearer exit strategy and more likelihood of seeing capital growth.

This is always one of the key reasons why we are against the large city centre developments in the UK, and Overseas resorts marketed solely to Brits and Irish - as we fell there are better investment opportunities out there.

Always ask these questions before you invest, and be happy with the answers and you should make some excellent investment decisions!

Alan Forsyth Ask an Expert