If you are thinking about investing in property, you certainly won’t be the last person to do so. Property investment can be incredibly lucrative, and some of the world’s wealthiest people have made their fortune through this method. However, as is the case with any investment, you should never dive straight in. You need to be well versed first, and that is exactly what this article is all about. Read on to discover some top tips for anyone that is thinking about buying their first investment property.
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- Make sure property is the right type of investment – Property investment is not right for everyone, just as stock buying is not right for everyone. It is important to ensure that this is the sort of investment that suits your lifestyle, as well as your risk profile. Don’t forget that you are going to need money spare to deal with any maintenance issues, and that it will be your responsibility to ensure any repairs are dealt with immediately. Of course, the only exception is if you decide to make the most of the services of a property manager. If you do not have any spare cash and you don’t want the responsibilities that come with being a landlord, it may be wise to consider another option. Make sure you are fully aware of what property investment entails before you make any decision.
- Be thorough – Don’t be anything less than thorough. Why is the vendor selling? Is the property livable from the perspective of a tenant? Have you had relevant inspections done? Being thorough is a necessity if you are going to turn property investment into a successful venture for you.
- Manage your cashflow – Poor cash flow management can see your days as an investor end quicker than you can say the word profit. It can be difficult to understand all the costs associated with acquiring and holding a property. This is why it is beneficial to seek the advice of a professional. They will help you to understand all of the costs entailed, so you can determine if it is viable. Also, don’t forget that you should make sure you have around 10% of the property’s value spare to cover the likes of management and maintenance fees, insurance, and land taxes.
- Pay down debt first – A lot of investors carry debt as part of their investment portfolio, but if you aren’t an experienced investor, this is not advised. Getting on the property ladder when you have many other debts is usually not the way to go. Get your finances in check before you go down this route.
- You must be patient – Far too many people get involved in property investment because they hope that they are going to become a millionaire overnight. Property investment is most certainly not a quick fix to your monetary problems. It is an approach that requires persistence and patience, and a long-term strategy is the only way to go about it.
- Find the right location – Your choice of location can make or break you when it comes to an investment property. Look for somewhere that has plenty of amenities, a growing job market, low crime rates, a decent school district, and low property taxes. You need somewhere that is in demand. The last thing you want is for your property to sit empty because you have chosen an unpopular area.
- Determine how much of a down payment you will need – A lot of people underestimate the amount of money they will need for a deposit when it comes to investment properties. They assume that they will only need around five per cent, as this is the down payment they made when they bought the home they currently live in. Unfortunately, it is not that easy. You will typically need at least 20 per cent for an investment property, especially as mortgage insurance is not available for rental properties.
- You need to have a plan – You know what they say; when you fail to plan, you plan to fail. It may be a cliché, but it is true. If you plan to start a property portfolio, and you don’t have a plan of attack, you are going to take a wrong turn, as you have not mapped out where you are going and how you are going to get there.
- Assess all of your options – A lot of people are so excited about buying their first investment property, and this can lead them to making rash decisions that they have not really thought through. It is important that you carefully assess all of the options that are available to you, so you can be sure that you make the best decision for your situation specifically. You can read this guide to buying resale or subsale property. It is a good place to get started. Once you have gone over that option, why not take a look at the likes of commercial property? There are many different avenues you can go down to make your investment property work.
- Be cautious of high interest rates – You may think that the cost of borrowing money is low at this present moment, but it is important to factor in the interest rate. After all, the interest rate on a property for investment will be higher. Remember, there is no point in investing in property if the mortgage payments are going to eat into your monthly profits too heavily.
- Don’t let your heart dictate – Last but not least, your heart should never rule over your head when it comes to buying an investment property. When buying a home, only about 10% of your decision is based on logic, and the rest is based on emotion. This is your home, though, so this is understandable. However, when investing, your heart should never rule your buying decision. Rather than negotiating the best price and outcome for your investment objectives, you will be more likely to over-capitalise on your purchase because you will let your emotions cloud your judgment.
