Real estate investment, at the moment it seem to be the subject most talk about and look to venture into. Word on the street is that it’s probably the best way to invest your money, get good returns and bring great wealth to you. Real estate investment has a great reputation all over for bringing good returns but remember not all investments may be fruitful. The secret to getting these great returns lies in understanding the fundamentals of what makes a great real estate investment and focusing on buying only the best real estate.
Always start by doing some research, which will help you to sort through the clutter by providing you with the best advice before buying your first investment property. Like any investments, this has no guarantees but for those who have more faith in bricks and mortar than stocks and shares here are some tips to consider first.
Are you ready?
As easy as it may look, real estate investing is not for everyone. You have to do a personal feasibility and understand if you have all the finances needed for such a plan. It does not necessarily mean that you have to be in the Forbes list to venture in this business but you do require to have a strong grasp on your personal finances before investing. Take your time and do some research, read some real estate books, blogs, websites and forums and get to know what real estate investors do to get successful. Real estate investing is not a “get rich quick” scheme, but an adventure that can span decades.
Find out what type of property to start with.
Just because you have a lot of money to venture into such a business it doesn’t mean that you should just start investing in any type of property. This is a risk you are taking and you should have a plan to help you get back on your feet in case things go bad. For someone buying their first investment property say a buy-to-let house, get to meet with people doing the same, and gather as much information about this investment. This will help you open your eyes and understand what you are heading in for. Working our a good return on investment is the first step when working with pricing. Keeping in mind that the price of the property may fluctuate up or down depending on the location, and future unseen circumstances. If you are a mortgage buyer, make sure you calculate correctly on how much profit you need to get from your tenants without being above the market price otherwise this may get you in a position where your property remains empty for some time. It is always advisable to start with a small property or a simple one to get to know the market first. Also think about the target tenants in this case. If you planning to rent the property to students get to know what it is they look for in a property. If a family, get to know what can make the house homely to favor long term stability.
Get to know the Neighborhood
Whenever you are thinking about property you will ALWAYS come across matters to do with location. Location is one of the most important factors to consider whether you’re buying for personal or investment purposes. Look out for a ‘promising’ area and this does not mean that you have to look for an expensive area. A ‘promising’ area means a place where people will enjoy living due to various amenities and the possibility of that area expanding with schools, social amenities, easy travelling means for commuters and security.
Find out the Local Vacancy Rate
Vacancy is one thing that an investor should be prepared for at any given time. Always save aside some money to use on your house expenses in case your property does not get any occupants for a while. Check out with local property management companies to determine the vacancy rate in the area you are looking to invest in. Try minimize vacancies by understanding what the local average market rent is and attempting to be just a little bit below average.
Ways to finance your property.
There are various ways one can pay for an investment property but if you can personally afford all the money then this proves to be the best option, as to avoid dealing with banks or loans. However, if you don’t have all the money needed or you would rather utilize greater leverage, you can supply just the down payment and take out the mortgage to cover the remaining cost. If you decide on getting a loan, get to know of the terms and interest rates first. Avoid adjustable rate mortgages as they may go up causing your payment to rise dramatically.
Decide on whether you want to self manage the property or hire a professional agent to manage the property for you.
It may be cheaper renting the property out by yourself but it also means having to create more time to cater for the property in terms of doing repairs, viewings and advertisements. Having a good agent means having a good network of plumbers, electricians, painters, and contractors if things go wrong or you look to expand. This could even save you some money as you may get very competitive rates. For any type of investment you should always think of the worst case scenario and have an exit plan.