Buying an Investment Property? Here’s What You Should Care About
A lot of people consider investing in real estate a great investment option. And why not? The ultimate aim of buying an investment property is to increase your wealth and safeguard your financial future.
However, if you think property investments are devoid of any risk whatsoever, you’ve set yourself up for something else. Several people think that investing in property always delivers stellar returns. While this holds true most of the time, real estate investments should not be considered foolproof.
The trick to getting great returns lies in being aware of the rudimentary facts that result in a sound real estate investment, and focusing on buying only the best real estate.
In this post, we bring to light a few important considerations that you need to be mindful of when buying an investment property.
Table of Contents
Start the Search
Well begun is half done! When buying an investment property, you will have the option of going through the grind either by yourself, or with the help of a real estate agent. You may want to start searching for the investment on your own as agents can, sometimes, make you feel pressured to make a purchase even before you’re sure of a property.
But don’t rule out engaging the services of an agent completely, especially if you have little/no knowledge of the process and paperwork involved.
Do make sure that you view all properties and neighborhoods that fall within your budget with an unbiased approach.
Consider the Start-Up Capital
All those interested in property investment actively consider the cost of purchasing an investment property, but make the mistake of ignoring the remodeling costs (especially if it isn’t a new home) and thinking that the start-up costs will end at the closing price of the deal.
If you’re buying an old home, you need to factor in the considerable amount of money you will be spending to make it habitable. Plumbing, wiring and foundation repairs can run into thousands of dollars.
Even if you buy a property in good condition, you will need to make certain changes to it to suit your taste. Do consider all these factors when computing your budget.
Age and Condition of the Property
These two factors should be considered in detail as far as buying a used property is concerned.
While buying such a property may seem like a bad idea, it may actually turn out to be great as you will get the opportunity to increase the value of the property by fixing the place up, which can increase your returns for capital growth and rental income.
Closely inspect the walls, ceiling, flooring, and the fixtures at the place. Check for cracks, leaks, or any other repair they may need. Take a look at the amenities provided. Make a note of the repairs needed.
If you’re not sure about being able to do this yourself, you will do well by hiring a professional building inspector to do this on your behalf by conducting a thorough inspection of the property to find any potential glitches.
You could also engage a skilled tradesperson who is licensed to carry out the repairs and has adequate insurance to protect you against poor workmanship.
Study the Market
Before arriving at a final decision, it is necessary that you consider other properties that are available in the same vicinity, and consult several locals and real estate agents about it to understand if a certain part of the area is considered better than the others.
Ensure you do your homework well and refer professionals whose opinion can be trusted. You can also look online for independent information on average rents, property prices, demographics, and so on.
If you’re buying an investment property, you’ll want to rent it out at a good price. Making your house attractive to tenants can be easier of you pay attention to a few important details. The idea is to refrain from personalizing the house, but making it more pleasing to the eyes for a majority of people in general.
Start with the color of your walls. Choose neutral tones as they agree with most people. Keep your bathrooms and kitchen in good condition. Upgrade the amenities if they’re outdated. Deliver what you promise and you will never be short of tenants who will be happy to live in and take care of your space.
Take a Long-Term View
Property investments are meant for the long term and it is suggested you do not get swayed by a temporary rise in property prices when deciding to invest. Invest only if you feel you can stay committed to the property for the long haul, as that way you will build up equity, which will enable you to purchase another investment property.
This, in turn, will help you find a balance between being financially stable and having enough moolah to live your life to the fullest.
Do take into account the fact that unlike stocks and shares, you cannot simply sell a part of your investment property when you need money.
Finance Your Investment
There are several ways through which you can pay for purchasing an investment property. If you have the money ready, you can make your payment in cash without having to deal with banks or loans.
However, if you don’t have all the cash needed or you’d rather utilize greater leverage, you can make the initial down payment, and take out a loan to cover the remaining cost. Simply shop for a fixed rate home loan at newcastlepermanent.com and fund your dreams.
In your excitement to buy an investment property, don’t forget to think about what you’re going to with the property before you buy it. If your plan involves selling soon for a higher price, then you’re better off investing elsewhere.
It is always best to have multiple plans for your investment with a view of how will make money of it. When you start, know what your exit strategies are going to be, and plan for them from the very beginning.
As exciting as it is to buy an investment property, it is equally daunting. A slight overlook on your part can result in the entire procedure of making a purchase turning into a nightmare. It is important that before taking the plunge you make sure that your finances are in good health. Only then will they propel your hopes of improving your cash flow in the right direction. The above points should be helpful in fuelling your investment ambitions.
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Author: Shayna Smith
Shayna Smith is a real estate investor with over 5 years of experience as an independent trader. She works with financial institutions such as Newcastle Permanent.