Are you thinking of investing in property? If so, we’re here to help! Investing in property can be daunting, confusing, and complicated. That doesn’t mean you should put it off though! Take the time to learn the ins and outs of property investment, and you can soon call yourself an expert and make a lucrative return from it. Read on to learn everything you need to know.
The Benefits of Property Investment
You’ve probably heard of the benefits of this type of investment, which is the exact reason you’re looking into it. But, just to confirm:
- Get tax advantages.
- Get income from rent.
- Increase the value of your property over time.
Things to Consider
There are lots of things to consider when you’ve decided that this is the path for you. It’s very different from choosing a home you would live in! Consider the following things:
- What are the latest property trends? It’ll vary from place to place. California’s outlook on property investment will differ from New York’s outlook, for example.
- What kind of loan can you get?
- Will you be able to cover payments if your property is unoccupied for a while?
- Can you afford insurance? You’ll need it, just in case.
- What will your total expenses be? More on this later.
- Does the kind of property you’re considering suit your strategy?
A big factor you need to consider are your expenses. First time investors underestimate this, so don’t make the same mistake as them! Your expenses will include, but are not limited to:
- Legal fees.
Are you prepared for everything you’ll need to fork out for?
Getting Your Search Started
So, it’s time to start your search. This is a very exciting but serious time! It can be tempting to hire somebody to help you, but this can make you feel pressured unnecessarily. You need to look at each property with a fresh head and an unbiased approach. All you need to do is ensure they’re within your investing budget.
Consider whether you plan to manage this property yourself or hire somebody to do so. If you’re going to do it yourself, it shouldn’t be too far away from where you are. Don’t know what to consider during your search? Take a look…
- The neighborhood you choose will influence the kind of tenants you get. Consider the kind of tenant you’d like, and think about getting a property in an area they’d be in. Want to rent to students? A student town would be useful. Emphasis really should be put on the location of your investment. You’ve heard the saying, ‘location, location, location’ haven’t you?
- You may not already be aware that schools can affect the value of your investment. If you expect to rent to families, they’ll want a great school for their kids. Make sure you have done your research on nearby schools.
- The criminal activity in the area of your investment should be as low as possible. You won’t attract many people if you invest in a high risk area, unless you want to rent to drug dealers and other criminals!
- If you can find an area with employment opportunities, you’ll be much more likely to rent out your property.
- The more amenities in the area of your property, the better. Take a look around for transport, gyms, shopping centres, parks, and more.
- Look at the current number of vacancies in the area. If there are a lot, this could be a sign that this isn’t a popular area for renters. Having a vacant property can be very expensive for investors. You need to expect this though, and be fully prepared for it. You can avoid it as best as possible if you research vacant areas beforehand.
- What is the average rent in the area you’re considering? This will affect the amount you charge for somebody to rent your property.
- How likely is it that your property will be subject to natural disaster? If something like this is likely, your insurance could go through the roof.
Tips on the Type of Property You Should Buy
Have you considered all of the above? It goes without saying that real estate investing is complicated, and there are many strategies you can use when it comes to choosing your property. If you’re stuck and this is your first time investing in property, go for something along these lines:
- A well maintained property that doesn’t need fixing up at all. Easy to make a good ROI.
- Fancy, expensive homes should be avoided, as you won’t make a huge ROI compared to the high price.
- A house you would happily live in. If you can live in it for a little while first, that’s even better. You’ll get a good idea of what must be done before you start hunting for tenants.
An Exit Strategy
You should always start endeavours like this with an end in mind. This is why having a plan is important. What will you do with the property before you buy it? Have multiple plans for your investment, and know how you’ll get your money. What exit strategies are available for you? Plan for this from the very beginning.
All areas have good towns, cities, neighborhoods, and properties. It can just be hard to find a good property, in a good neighborhood, in a good town or city. All of these aspects need to align in order for you to find a great rental property. You should have realistic expectations, and your finances also need to be nice and healthy so you can make cash flow from this without worrying.
Also, carefully consider your exit strategy as mentioned before. Don’t underestimate how important this is, as you never know what might happen. Even if you’re planning a long, happy life as a property investor, something could happen that means you need to get out. You don’t need to be an expert right from the get go, but you do need to do your homework. Real estate investors don’t succeed by accident, they do it on purpose with proper planning!