There is no denying that property investment has become one of the most popular forms of investment. It does not present a get-rich-quick scheme but it does offer an excellent platform for making a consistent income over a period of time. However, this will only be the case if you approach the process in the correct manner. There is a lot that needs to be considered and numerous steps that need to be taken. With that being said, read on to discover the complete property investment checklist.
What is ‘investment property’?
‘Investment property’ is simply a term that is used to describe a real estate purchase that has been made with the intention of earning a return on investment. This can be through the resale of the property, rental income, or both. Flexibility is also represented via the fact that property can be a long and short-term investment. An example of a short-term investment is when a property is bought, renovated and then sold at a higher price.
What should you consider when investing in a property?
If you ask a professional what the best investments are, it is likely that property will feature at the top of the list each and every time. However, this is only the case if you invest wisely. Therefore, let’s assess some key areas of consideration in relation to investment property…
- Understand your current situation – Being able to understand your assets and your liabilities is a critical component of investment management. If you fail to do this, you will struggle to pick the right property for you, as you won’t be aware of your capabilities.
- What is your goal? – What do you aim to achieve by investing in property? Are you looking for long-term wealth? If so, you will need to focus on increasing the property’s value over time. Are you seeking a steady income? If so, the rental market is where your research needs to commence.
- Do your research – You need to find the answers to all of these questions… Is the investment in a good location? Is the neighbourhood safe? Is now a good time to invest? Is the property near shops and public transportation? What is the average rental prices being charged in the area? There is no such thing as too much research when it comes to something as significant as property investment.
Finding the perfect estate agent
The first thing you need to do is make sure you find an estate agent who keeps you updated. You may not find the perfect property the first time. You may have specific requirements and, therefore, nothing on the market currently meets what you are looking for. Whatever the reason is you need to ensure the estate agent constantly sends you updates and keeps you informed. You shouldn’t have to go searching for a house to invest in – it is their job to present them to you.
In addition to this, one of the facilities you need to make sure the estate agent has is the ability to provide you with all of the information you could possibly need about the property you are considering. This needs to be up to date and it needs to be clear and easy to understand. You should be given high-quality photos of the internal and the external area and these should be in colour. Low-quality photos are a huge issue with a lot of estate agents today. People can barely make out what the property actually looks like. Therefore, when they go to view the property in question they end up disappointed because it is nothing like it was made out to be in the picture. This ends up being a massive waste of time. Aside from photographs, the estate agent should also give you the floor plan as well.
And finally, if you are new to the area in question. Make sure they take the time and effort to provide you with all of the information necessary. Where is the nearest local school? What is it like? Where are the local amenities? You don’t need to sit online and spend hours doing this research yourself. A good estate agent provides the complete service and so does all this for you.
Location, location, location
Another vital element when it comes to property investment is choosing the right location. A lot of new investors make the mistake of only considering rental yields and sale prices of the past. You need to look at predictions and projections for the future too. After all, it could be that the area has reached its peak and it is unlikely that the prices are going to continue to rise? Or, could there be something in the pipeline in the future that is going to cause the value of properties to decrease in the area? Extensive research is needed to understand all of this.
You also need to think about your target market. If you are going to be appealing to professionals, then you need to look for areas whereby there are plenty of public transport options. If you are looking to appeal to families, consider the schools in the area. By outlining your target market first, you can then locate the areas that are most suitable. Of course, you may simply adapt your target market based on the location you choose, but it is still important to know what groups of people the area is going to appeal to.
Consider a distressed property
You need to consider all options when it comes to property investment. There are many benefits associated with opting for a distressed house.
The first thing worth considering, which is the most obvious factor, is that distressed properties are cheaper to buy. This means that this is an investment which is open to more people. Moreover, it is exceedingly popular now considering the real estate market in 2018. Properties are getting more expensive all of the time, and so for a first investment, a distressed property is a great route in.
This also means that the risk associated with this type of investment is less compared to the other options available. This is because in general people tend to have a lot less to lose because they are not investing as much of their money into the project.
The lower risk and lower costs associated with investing in distressed properties are not the only benefits linked with this option. Moreover, the scope for profit is quite simply huge. People are in control of the amount of money they can potentially make, depending on the level in which they decide to improve the state of the property.
Furthermore, people tend to like this option when they want something more hands-on and something that they can really get their teeth stuck in to. A lot of individuals who seek distressed properties tend to do so because they want to take control of the ‘DIY’ involved. It becomes a person’s own project and usually becomes the source of great pride.
What are some final top tips for buying investment properties?
Now you know what an investment property is and the points you need to consider before you delve into this world, so let’s end with some top tips for those who make the plunge and purchase a property…
- Timing is everything – Don’t just invest for the sake of it. Have your money lined up and wait for the right property to appear. This also allows you to act quick and decisively and, therefore, you may be able to get your hands on the property before other suitors even have a chance.
- Stay away from big banks – It can be natural to go to the biggest and most popular banks when you want to assess your options for investment property. However, your local neighbourhood bank may prove to be more flexible.
- Seek professional aid – There is nothing wrong with asking for help. Yes, it will cost you money. But, it will also make you more money because you have an increased chance of making the right decision when selecting an investment property for you.
As you can see, there are many different factors that need to be considered when you are looking for the perfect property investment opportunity. If you follow all of the steps that have been mentioned above, you can go a long way to making sure that you choose the ideal property for you.