Investing in property is still seen to be one of the safest long- term investments known to people.
Some investors may want to buy a property and find tenants to rent it out straight away while others may want to live in the property while they renovate it. Making the right choices is critical to making a successful investment.
Investing in property can be a fantastic way to create wealth, but there are a couple of tips that we would like you to consider.
Tip 1: Know your budget
Before you invest in a property, it is essential to understand your cash flow and how much money you are working with. It is also wise to get a pre-approved loan from the bank to see how much you are able to borrow and qualify for.
Tip 2: Don’t underestimate ongoing costs
Ensure that you have a budget that can be used on rates, taxes, insurance and maintenance. Once you have purchased your investment property, you should do what you can to prevent costly maintenance issues arising.
Tip 3: Buy in a growth area
Try to choose an investment property that is based in an area with a strong demand for rental accommodation. Buying a property that is in close proximity to schools, universities, transport, and embassies makes it more attractive to renters.
Tip 4: Be realistic regarding your investment goals
Look at your investment strategy. Is your investment for fast capital growth or are you looking to hold the property long term? During boom periods, it is easier to renovate a property and flip them for a quick profit. During slower economic times, a different strategy will be suited.
Tip 5: Build time & sweat equity.
Paying tradesmen to renovate an investment property is extremely costly. One way to bring down the costs drastically is to get your own hands dirty so that you can save money and increase your profit.
Tip 6: Buy with your head, not your heart
During the process of house hunting, it is very easy to get caught up in emotions. Be certain that you have weighed up your pros and cons.
Common mistakes to avoid when investing for the first time
Everyone wants to be a property investor, but the reality is you need to be informed, crunch the numbers and stay calm before taking the leap.
Here are some key mistakes people make when investing in property for the first time:
- Jump right in, before doing thorough due diligence
- Make decisions based on emotions not facts
- Borrow to their limit and don’t consider future changes in the lending market
- Take too much risk; for example, they take out interest-only loans with no safety buffer
- Choose the wrong location or asset
- Rely on rental income to pay expenses
- Don’t all the possible tax deductions
- Don’t think about the long-term strategy.