Investing in Real Estate – A How To
If you are just getting started with real estate investing, there are some important things you should consider before taking the big leap.
Buying a property can be a daunting idea when you realise all of the things that need to be done. Looking, researching, negotiating, losing out to someone else, getting finance organised, getting legal advice, getting inspections done (building, pest, strata etc) and finally, draining your bank account to finalise the purchase!
Here we will discuss a few things to think about to help lessen the burden.
Clarify Your Goals
It’s a good idea to do some reading and research about property investing, if you haven’t already.
After getting some expert advice, either from advisors or books, you should have a good idea about what strategy you want to follow to achieve your wealth creation goals.
Common strategies in property investing include:
- Long Term Investing for Positive Cashflow
- Long Term Investing for Capital Growth
- Short Term Holding, Renovating and then “Flipping”
- Short Term Holding, Speculating on the Property Cycle
The type of property that you want to buy is also an important decision. Apartments, townhouses and units will have different returns compared to houses or even commercial property. The area that you invest in will play a critical role in how your investment performs as well.
Prepare to be Patient
With longer term investing, it can take years to start seeing gains from your investment.
Property investment is definitely not a get rich quick scheme and once you purchase that first property, you will need to let go for a while and just focus on keeping up with the costs.
Short term holding of property is a riskier exercise for the novice and it is recommended you take a long term position if you are new to
the area.
Get Your Finances in Order
You normally need a decent deposit and pattern of savings before purchasing an investment property. The exception to this is if you already have substantial equity in another investment (such as the family home or stocks).
Always aim to reduce personal debt such as credit cards and personal loans as this reduces your cash flow and is looked on negatively by
the banks. If you end up buying a property which is negative cash flow, you will need to demonstrate to the lenders that you can sustain these payments.
Dive In
Once you’ve decided on your strategy and gotten your finances in order, start researching areas that will be in high rental demand. This is one of the most important factors, because if you purchase your property but then struggle to rent it out, you will be left paying off the mortgage out of your own pocket.
This is unlikely in most metropolitan areas, but is a possibility in a regional our country town area where there is less demand. Normally, the worst case scenario is that you will end up dropping the rent in order to attract tenants. It’s not desirable but at least you’ll have
money coming in to pay the mortgage.
After doing your proper research and due diligence, make an offer on a property where the numbers stack up as a good investment. Remember that investing in property is a decision based on calculations and statistics, it should not be an emotional decision such as buying your own home.
You should avoid procrastination too much because time in the market is normally better than “timing the market”.
Good luck with your investment endeavours!
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I think all of these tips in property investment are very useful and can help everyone especially the one who has no idea when it comes to this kind of thing but still want to invest in a property. I believe getting the finances in order is the most significant thing to be done when planning on investing in a property.
minerva @ real estate park city ut recently posted..SOME INTERESTING STATISTICS
These are well thought tips. Patience is needed when buying a house. It can be a VERY long process.
Love the article, I have family that works in real-estate and I too am interested in it. Very useful information, I now know more about it and will be that much more prepared if I ever get into the business.
Joe@Pigeon Forge Cabin Heaven recently posted..Pet Friendly Pigeon Forge Cabins For Rent
Very helpful tips.. Especially the importance of buying an apartment in a locality where you know the demand will be there for renting! This is what I focus on now before I even see the place. Thanks for sharing!
I agree that rushing might be the worst mistake ever. You have to take your time!
We do a lot of construction work in and around the Louisville area, and we have been thinking about getting into renovations and investing in some properties. Thanks for the enlightening post!
The tips you have presented are trully helpful for those “newbie” in the business. Investing in a real estate field involves great amount of money and to mismanage this type of assest will eventually put the business into bankruptcy. Thanks for these very helpfull tips!
Thanks for sharing such amazing tips on investing in property! It indeed sounds time consuming and a lot of headaches, but in the end it is totally worth it.
Edd @ Dome Labels recently posted..Domed Labels World – The DomeTag Blog
It is always a good idea to also check for any government regulsations concerning tenants. Here in Toronto, Canada we have landlord and tenant laws known as The Tenant Protection Act. I do not know of any laws called The Landlord Protection Act. We subsequently have problems with some well versed residential tenants who take advantage. The best advice is to very thoroughly screen and check potential tenants before they move in and make your life miserable. Having said that tenants will pay off your mortgage for you and you will have an assett that should be worth quite a tidy sum once the mortgage is paid off. Good Luck
Very helpful tips for starters in real estate investing! Thanks for sharing.
Urban Interest recently posted..Kleurtemperatuur
I have lived in several states and each state has different laws relating to tennants rights. after several ugly evictions you learn to do extensive background checks. It is worth the fee, every time. One eviction can cost you thousands of lost rents.
These are indeed live saving tips. It’s one of the biggest mistakes you can ever make to rush and buy/rent the first property you like. Never ever do that mistake. I see you guys at propertyinvestingtips really know what you’re talking about. Thanks for sharing.
For me to own a house is much better than to rent a house.
Having financial capacity to invest in real estate isn’t always enough. There are many essential things to consider. I believe you’ve tackled almost everything an investor should know and consider before getting into real estate investing. Thanks. Homeowners Insurance
very thorough and helpful post. You are so right about being patient, this is the hardest part for me when it comes to investing in general.
Dan Keller recently posted..Why Is Gold A Good Investment?
Despite being more expensive and require long-term investment, I think buying a house better than renting.
These tips are great. A lot of issues arise when someone doesn’t do their homework beforehand. It can quickly become much less of an asset to you and more of a liability.
Investment properties are like children. They need constant work and care and having 2 is never just twice the work of having 1…
Paramount Magazine recently posted..First Time Property Buyer News: HSBC loans record amount to first time buyers
Property investment is the wisest thing you can do with your money. However, you need a lot of patience and must be ready to many time consuming tasks if you want to be in this kind of business.
@SolidWorks says:I am agree with you buying a house is better then renting a house because instead of paying every month little less pay little more so after few years you will own that property.
When considering a location to purchase a rental home, check the web or your local news websites to see if they have something called a ‘crime tracker’. It gives you reports of any crimes that have been committed near the area. We often tell prospective tenants to check that site and see if they like the area before they commit to a lease. In general it’s just good to know.