Property investment is the goal of investing your money, and usually the banks money, to make you money. This is an important aspect to first ensure you understand in any property decision. It is there to make you money. If you aren’t making or going to make money, it is not an investment.
The next thing to understand is are you in a position to start investing in a property. This means are you financial enough to purchase and hold on to a property or get the loan needed to perform property investment. This question is also intertwined with what property strategy you want to go with. To get a loan from the bank you will need a deposit and either a good savings record or substantial assets. Work out how much you want to borrow and the deposit you need. You can talk to a mortgage broker about this to get a good idea. It is also imperative that you have enough cash flow to support the property in the long term. A property investment strategy can be ruined during the bad times if you can’t hold on to investment properties.
A property strategy must be devised for what you wish to achieve. There are many forms of property investment strategies including, buy and hold, wraps, lease-options and renovations. If you want a long term cash gain, then a buy and hold is the strategy for you. You buy a property with potential for high capital gains and hold onto it for 5-10 years. While you are holding on to it, you can rent it out to cover the loan and other costs. Other property investment strategies such as wraps and renovations are for a quick(er) profits. You purchase the house and sell it on soon after for a profit. This strategy is more geared towards full time property investors.
Tax is the next most important aspect of real estate investing. It can be used to your advantage and proper understanding of it can reduce your tax payable. When you sell a house you will be stricken with capital gains tax. This tax is normally at a very high rate of up to 48.5% depending on what country or state you live in. The keeping costs of your investment property can be off set against your tax. For example depreciating assets and in certain countries even the mortgage repayments. It is always best to do more research and speak to professionals regarding this area.
Property investment can be very lucrative if done correctly using varying strategies over the long term. As always do your research and make sure you have a plan when proceeding.