Real estate can be a smart long-term investment. Many people are now choosing to incorporate an investment property into their portfolio as they plan their retirement or investigate ways to make their money work harder for them. Property investment can generate a passive income, and has historically followed a gradual upwards trend. However, there are quite a few considerations for first term investors. Here are five tips to get you started.
Do Your Research
Depending on your budget, location, market conditions and your goals, there are several options when it comes to real estate investment. You could purchase a house, apartment, townhouse, duplex, commercial property or warehouse. In addition to online research to identify potentially lucrative opportunities, it’s well worth enlisting expert advice from residential or commercial real estate agents to help you onto the right track and find the right investment to suit your portfolio and investment goals.
Understand All of the Expenses
When looking at houses, it is easy to focus solely on the property price. You need to take into consideration council and strata fees, insurance, property upkeep and maintenance, potential periods of vacancy when the property is untenanted, and taxes. You may also decide that it is more practical to engage the services of a property manager, rather than take on all this headache yourself.
Most importantly, make sure that your budget can adapt to possible interest rate rises. Your monthly loan repayments could significantly increase if interest rates rise and you haven’t locked in a fixed rate.
Choose with Your Head, Not with Your Heart
Shopping for an investment property is vastly different to buying a family home in which you may live for the next twenty to fifty years. Instead of imagining your children climbing trees and playing Monopoly in the lounge, you need to consider whether the carpet is hard-wearing, the garden is low maintenance and whether any immediate repairs are required. Tenants are unlikely to take the same level of care of your property as you would yourself, so a low-maintenance home will stand up to the increased wear and tear more easily.
Look for Areas with Planned Infrastructure Improvements
People tend to want to live near to amenities like schools, hospitals, and shopping centers. By researching planned developments in the areas that you are considering as investment opportunities, you might be able to pinpoint a location that is likely to be in high demand in the future. High demand means more competition for rental properties, which, in turn, allows you to reap higher entail income. It also indicates that you are unlikely to find your property untenanted for any lengthy period.
Always Get a Pest and Building Report
If the owners are pushing for a quick sale or the deal seems too unbelievable to be true, it probably is. No matter what the circumstances, it is always a good idea to get a professional pest and building report. While these aren’t failsafe, as they can only report on what is visible at the time of the inspection, they will generally pick up any major structural issues, termites or pests. These kinds of problems can be a massive drain on your budget, so you need to make sure that they are identified before you start making offers or negotiating on the property.
Buying a property is a significant investment, so don’t rush into it. Do your groundwork and make sure that you are making the right decision, and you will see the dividends over the years to come.