What you Need To Know Before Investing in Real Estate
Investing in real estate is always going to be many people’s number one aim when it comes to investing for their future or for diversifying their portfolio. Whether you want to invest in residential properties or you are going down the commercial route, it pays to do your research before committing to a purchase.
Buying a house as an investment property is vastly different than buying for personal use. Whereas you buy a family home with your heart and choose your property based on personal criteria, buying a property you are letting someone else use needs to consider different things. This needs to be purely a decision you make with your head to know that you are making a good financial investment.
If you are investing in property for the first time, knowing exactly what to look out for, how to approach this type of purchase, and what legalities you need to be aware of should be your top priority and all should be things you know before you agree to purchase anything.
How can you prepare yourself to buy your first investment property?
This property is an investment and should be treated as such. You need to go into this with a clear plan of what your budget allows for and what type of return you can get for your money. Having the funds in place and ready to go will mean that once you do find the right property, you can commit right away.
Allow for costs in your budgets such as fees for realtors, solicitors, renovation works, and preparing the property for tenants along with time spans. you need to have a timeline in place to allow you to start making money as soon as possible and know what you can typically be expected to the payout from the moment you clear escrow until your investment starts making you money.
Doing your research on the type of property you are looking to invest in and what the market is like for that property in the local area is vital. Knowing what houses are selling for and rental income yields will give you a better insight into how you can set your rent price and how long it could potentially take to get renters into the property.
Look for affecting factors such as local amenities, transport connections, and highway access along with current residents demographic and the percentage of homeowners to renters.
Be careful when making calculations on the projected growth of the rental market. Use a percent increase calculator to make sure your projections are accurate when doing the sums.
Once you know the local area better you will know what type of property you should be looking at buying. If your location features a hospital or university in its local area, then choosing a property that is favored by those attending and working in these facilities will be a safer investment than opting for a family home.
Other smart investment options are looking for areas with high tourism levels or those undergoing a regeneration boost. This is likely to bring more people to the area and help you hit your maximum rental target.
Understand Your Goals
Once you know exactly what to expect from your investment you will have a better idea of what options are the best for you. If you are in this for the long haul, then investing in properties that will attract long term renters such as families, you will know that heading to an area that is popular with families or expectant parents will be your best option.
If you want to buy, flip and resell, then looking for properties that need some degree of work to them or foreclosures can help you turn it around in a relatively short space of time to help you move onto your next project.
If you are looking at commercial properties, ask yourself what type of work are you looking for on the property and what type of clients do you hope to attract? This will give you a better idea of the type of property to look at and what options are available to you when it comes to expanding and refitting the premises.
Putting all of your money into one property can limit your potential investment options. It may be an option to invest small sums in different properties to develop a multi-faceted portfolio. There are many options available to choose from when it comes to creating a diverse portfolio. One example is real estate crowdfunding which takes away all the added stress of investing in properties and allows to purchase a smaller stake in many different properties instead of just one.
How Hands-on Do You Want to be?
Do you want to be the landlord that handles everything or would you prefer to hand this over to a letting agent? If you choose to let a letting agent deal with any tenant issues, then this cost needs to be factored into your potential returns. Choosing this option could give you a better deal when it comes to non paying tenants or damage caused by inhabitants. If you choose to be a hands-on landlord and deal with your tenants directly, you need to be aware that this comes with a 24/7 commitment to be available for your tenants any time there is an issue. you will also be directly responsible for rent payment collections too.
In conclusion, investing in real estate is never going to be a bad option however, knowing what you are getting into before committing to investing any money will help you to make sure you make the right investment for you and your money. Pay attention to the small details to help you build a better picture of how you want to progress and what to expect at each step of the way.