Property Investment - 10 Tips to Get You Going

2015, PROPERTY

Source: www.realestate.com.au 

Real estate is still considered one of the best investment options if you are looking for an opportunity to save for retirement. It’s considered by many pundits to be a relatively safe long-term investment

Some investors choose to purchase properties for the sole purpose of renting them out, while others may live in a property as their home for awhile, before renovating it in anticipation of it being rented out. 

Property investment is a good way to generate wealth. But there are aspects you need to consider before you get started. Here are 10 quick facts to remember. 

1. Establish a Budget
You need to have a good understanding of the amount of money you have access to, before investing in a piece of property. Check your savings and cash flow, and consult your bank to find out how much you can borrow, especially if you have limited cash flow. 

2. Consider Recurring Costs
Your budget should factor in general repairs, insurance, and property rates and any current or newly imposed taxes such as GST. And once you have bought a piece of property, you should take measures to reduce its maintenance costs. Carry out repairs and replace fixtures that are not functioning well, to ensure that the property runs efficiently. This will save you money. 

3. Identify a Growth Area
If you primarily intend to rent out the property you purchase instead of living in it, it is advisable to identify a location with a large rental demand. Choose locations popular among populations that are more likely to rent property, such as students and new graduates. A property near a college campus or commercial centre would be ideal.

4. Set Practical Investment Goals
Some investors look for an opportunity to make money fast, while others want to hold on to their property for an extended period. Your investment goals should take into consideration the market situation. If there is a market boom, you can consider renovating and selling property for quick returns. On the other hand, if the economy is going through a difficult phase, it will take longer to attain similar growth. You should be prepared to hold your property for some time. 

You should also consider the amount of work required to renovate a property. For example, you may like the view of a property built on a hillside, but its renovation costs may make it less than ideal in terms of return on investment. 

5. Apply Some DIY 
Do some of the renovations yourself instead of relying on hired builders. This can help you save a significant amount of money. If you can do simple repair jobs on your own, you can enjoy higher profits when you rent or sell. 

6. Find Practical Properties
Select practical properties that people will want to rent. A unit with a luxurious interior may look fantastic, but it may be an unnecessary cost, because renters are often simply looking for a practical place to live. Also, the more luxurious a property, the more expensive it is to maintain. 

7. Avoid Getting Emotionally Attached
It is easy to allow your emotions to influence your decision when purchasing a property, but this should not be allowed to happen. Weigh all the advantages and disadvantages of the property rationally before buying. You will still be paying for it after the initial romance has faded. 

8. Avoid Negative Gearing
Properties are negatively geared when rent does not fully cover investment loan repayments. This may allow you to enjoy some tax advantages, but it can be frustrating if your cash flow is inadequate to meet loan repayments. For this reason, you should calculate your costs and market condition keenly before making a purchase. 

9. Evaluate Your Debt Tolerance Level
You should evaluate your debt tolerance appetite before making a property investment. Especially if you are still paying off your primary home, it may be difficult to purchase another investment property. Carefully consider your appetite for debt and proceed if you find your debt levels within your control. 

10. Inspect Before You Buy 
Hire a professional to inspect the property thoroughly before you sign any purchase agreement. This can save you a lot in terms of repairs in the future. Be sure to check the property for structural damage, broken fixtures, parasites and pests such as termites.

Property investment is an exciting endeavour, and it can be very rewarding. Equip yourself with knowledge, and you can do very well for yourself in this field. 

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