An investment property is any real estate which is purchased with the purpose of financial gain. It is generally not owner occupied but is rented out or it can be purchased with the purpose of resale. If the owner has been lucky enough to buy a bargain it can be resold at market value for a profit. Often renovation of the property will enhance the value and it can then be resold at a profit or held and rented out with a gain in equity.Investment Property: Tips, Guidelines and the Basics Click To Tweet
Although the idea of owning property for financial gain sounds simple it is not that easy and there are some things that you need to consider before you start investing. Here are some guidelines that will help you to invest successfully.
Set your goals and define the time line. Decide when will be a good time to buy, how long you can afford to have you capital tied up in the property and how you will service any mortgage that you take out. Understand return on investment and know what ROI will be acceptable to you. Good planning ensures that you buy an investment and not a liability.
Location is a vital consideration. You will want to invest in a location where the property will be easy to rent out with good returns and where the property will appreciate in value over time.
Build your list of contacts. Join a property investment association. The other members will be delighted to share their insights with you. These associations often have regular meetings with a guest speaker on an informative topic. This is a great way to learn about property investment. If you need a property manager you will probably either meet one there or someone will be able to recommend a good one to you.
Keep your finances in good shape. Monitor all your ingoings and outgoings. Make sure that rent is coming in regularly and follow up any arrears immediately. Only spend money on items that can be considered an investment and will enhance the value of your property. Set up a maintenance schedule so that this is done on a regular basis. This will ensure that your property keeps its value and that you don’t have to pay a huge repair bill in a few years because the property was neglected. A well maintained property is easier to rent out and brings better returns.
Vet all prospective tenants carefully. You will want to be sure that your tenants will be able to pay the rent and will look after your property. If you have invested in a quiet neighbourhood you will also want to be sure that they will not disturb their neighbours.
If the idea of maintaining your property and managing tenants is daunting to you a very good option is to engage a property management company. In fact if you are considering investing in a number of properties this is a very good idea as managing a few properties can soon grow into a full time job. You will need to factor the cost of property management into your return on investment calculations. A property manager normally charges around 10 percent of the rent. This can be a really good investment to ensure that your property is managed in a professional manner.
As soon as your goals are set, you have a time line in mind and you have your finances in order you can start looking for a suitable property to invest in.
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