Property has long been viewed as one of the safest ways to invest money, and if done right, property investment can pay off in a big way. Ambitious millennials have plenty of options for investing their cash, and with age on your side, you can afford to invest now and have plenty of time to see your investment grow. Property is a first choice of investment for many people because it is tangible. Unlike other higher risk investments, you can see property for yourself and know that it will be around for a long time, after all, people are always going to need places to live.
Before you splash the cash and rush out and invest your money in a property, it is crucial to ask yourself a few questions first. Property investments involve a lot of cash, and making the wrong decision could minimize your profits at best, or see you incur a loss at worst. Make sure that you go into your investment with your eyes open by considering these points first:
Do Your Research
To make the most from your investment it is worth taking a little time now to do your research, before diving in and making a purchase. Research now is time well-spent, and will ensure you get the right property.
When carrying out your research you need to consider the areas that you would potentially invest in, how well the market has performed in recent years, and the rental yield you could expect to achieve. It is worth scouring the local property market to see how much properties in the area sell for, and the amount of rental income that can be realized. It is also useful to compare different areas to see how the property market performs in each.
When you arm yourself with plenty of local knowledge, any decision that you make from here will be based on the facts highlighted by your research.
Know Your Figures
Working out a realistic budget for your investment is essential. Over-stretching yourself financially can have a significant impact on your quality of life, and cause lots of unwanted stress. Don’t forget, the aim of your investment is to improve your life, not to become a burden.
Knowing how much you are prepared to pay for a property, and how much you can afford to pay in associated costs, such as legal fees, is crucial. When working out your figures you will also need to factor in maintenance costs for the property, along with any money that will need to be spent on renovations.
Property investment is such a sweeping term because property investments can actually differ greatly. Investing in commercial property is different from buying a condo, so think carefully about the type of property you want to buy so that you can make the perfect choice.
The type of property that you choose will influence what you can do to the property, along with the costs of ownership, and how involved that you need to be in the upkeep of the property. A big benefit of investing in a condo, is that condo management companies will take care of many admin and maintenance tasks on your behalf. This means that if an emergency maintenance task needs fixing, you can trust that it will be carried out on your behalf with minimal effort from you. Using a property management company is the preferred choice for many investors, as it makes their investment far less time-consuming, and they do not need to be involved in the day to day management of the property.
Buy With Your Head, Not Your Heart
One trap that many first-time property investors fall into is buying properties with their heart and not their head. If you plan for the property to be merely an investment, that you need to think about it in business terms. Your realtor may show you properties with a wow factor that you fall in love with, but, if they aren’t a good investment you need to resist temptation. If you plan to live in the property at some point in the future, then you can allow yourself to fall in love with a property. However, if the sole reason that you are buying the house is to make you money, then you need to keep your eye on the bottom line instead.
The same buy with your head, and not your heart rule applies to properties in need of renovation. A property may have big potential, but if taking on the project will cost you more money than you are going to make from it, or you simply don’t have the time to put the work in, it is time to walk away. Ultimately, the property that you invest in may not be to your taste, or somewhere that you would choose to live. When it comes to investing in property, money is the deciding factor, so it is important to focus on profit.
Keep it, or Flip It?
Are you investing in a property to keep as a rental, or are you planning to flip it, and realize your profits? Both short term and long term property investments have their pros and cons, and are heavily influenced by how the market is performing at the time. Generally speaking, holding on to a property for a long time usually means that it will appreciate in value. Investing in a property and flipping it fast presents a slightly higher risk, especially if you are financially dependent on realizing the value quickly.
If your plan is to buy a property, renovate it and flip it, you will need to watch the local housing market closely. You will need to make sure that you don’t overspend on the renovations, otherwise you will eat into your profits. If you are skilled at DIY projects, you may want to save money and take on some of the work yourself to cut costs, even if its just refreshing the paint.