Things You Need to Know About Property Investment
Property or real-estate investment is also like any other business has associated risks. But there are many people who have earned a fortune from it. But it doesn’t guarantee that everyone can earn a fortune by investing in property. Whatever type of property you are purchasing, all these requires a large amount of cash which makes it a very risky business provision. There are many things you need to know before investing in real-estate.
When you are investing in property, you will always look for the profit outcome at the end. So, take it as a purely business investment and think logically about it and not let your emotions affect your decision. So, lower the price you get better the chance that you may get higher profit from it.
Always buy your property in well-researched areas based on your targeted clients. Make sure that the location has real economic growth drivers to sustain your investment in the future based on your targeted clients. Apart from research, using an analytical approach logically based on the financial factors will help you purchase the best property. A good investment is based on economics and not on emotions. The other factors like:
- Property Cycle: Aim to purchase at the lowest point of an area so to capitalize on growth. Not buying in a boom cycle.
- Capital Growth: To buy where growth in the market going to occur. Utilizing a buy and hold strategy and strong economic growth drivers will ensure the capital growth which will enable you to gain equity in your property and this keep you purchasing more properties.
- Solid Yield: Aim to buy property that has more than 5% yield. A solid yield will keep you in the market and you can maintain your investment. The equation is: ((Rent/Week * 52) / Purchase price) * 100.
- Knowing Market Value: To buy property on or below the market value of the region. This ensures that you are not paying too much, or it will stagnate your ability to purchase more. OFF THE PLAN purchases are not recommended for this reason as the true market values are not mentioned.
There are different ways that you can invest:
- Positive cash flow property
- Negative gearing for capital growth
- Do renovations to increase the value
- Subdivide a property
- Do larger developments
- Do a buy and hold
- Buy units
So, work out on what investment strategy suits you and invest likewise.
A calculation of expenses and profit must be worked out beforehand. Calculate the money you have, how much you can borrow, calculate the purchase cost based on your suitable investment strategy and the operations cost. Lastly, estimate the price you are going to list for the property and minus the expenses to get a rough estimate of the profit. This calculation is necessary to keep you in the safe zone.
Pay all your other debts if you have any, choose appropriate investment loan options and choose your partner carefully, if required.