Are you about to dip your toe into the property investment market? Investing in property is a popular way to build your assets and hopefully increase your net worth. However, don’t get carried away in the excitement. Not every property investor makes money but doing your research and making a sound decision when purchasing will put you in a good position for the future.
Don’t Forget to Explore the Commercial Market
When you are doing your research, it is worth investigating the option of investing in commercial real estate in your area. Commercial buildings generally have longer-term tenancy agreements, providing greater long-term rental certainty. Plus they have fewer outgoing expenses, as tenants cover some costs like council rates and body corporate fees, and tenants will frequently make property improvements that can add value to your investment. Talk to a commercial real estate agent to find out whether this might be a good option for you.
Take an Analytical Approach
When you are searching for your first house, you are looking for somewhere that you can envisage you and your partner cooking dinner together, snuggling on the couch watching movies and throwing a football around in the yard with the kids. When you are searching for an investment property, don’t fall into the trap of looking for somewhere that you love. Instead, take an analytical approach and look at the return on investment, the quality of tenants it is likely to attract, and whether the surrounding area is growing in size and popularity. The cute little white cottage may not be the most economical option, so it is essential to take a step back and review your choices from a purely financial perspective.
Plan for Interest Rate Rises
When you are purchasing an investment property, you should carefully analyze your budget and consider how much money you can afford after your own rent or mortgage and your living expenses. Just remember that although interest rates might be low when you purchase, they could change at any time and this can potentially have a dramatic impact on your repayments. The last thing that you want is to be forced to sell your property in a few years because a change in interest rates means you can no longer afford the repayments.
Don’t Forget Maintenance Expenses
As well as the base cost of the mortgage, you will also need to be able to cover the cost of maintenance. This includes items that are relatively easy to plan for, like regularly painting the outside of the house, and unexpected expenses, like burst plumbing or a broken water heater. Houses, like cars, need to be maintained regularly to keep them in good shape, and regular upkeep is generally more affordable than having to replace something entirely once it has worn out.
Know the Market and Negotiate
When you find a property that you think is right for you, do plenty of research on similar sales in the area to determine a realistic price bracket. If the owners are under pressure to sell, you may be able to pick up a bargain. Nevertheless, for the most part, it is possible to get a good sense of the likely price by reviewing recent sales. In this way, you will be able to set a firm limit, open up a conversation with the agent, and start your negotiations!
Hopefully, this has helped you to formulate your property investment strategy. Remember, failing to plan is planning to fail so make sure you do that research!