8 Things First Time Investors Should Know About Property Investing
We have all heard those stores about successful people who have made an absolute fortune through property investment. As with any business, property investing has plenty of risks associated with it. It does not matter what type of property you want to purchase or if you are planning on reselling it or renting it out, property investment takes a lot of cash so that means you have to take careful measures to guarantee that you will make a profit on your investment or to protect yourself against big losses.
There have been many shortages of properties over the last several years and this means excellent opportunity for investment. Not everyone will earn a fortune through property investing. It is important to be prepared and know what needs to be done before you get started with property investing.
1. Research is Number One
Do plenty of research before you purchase your first investment property. The property should be in a location that is desirable for clients that you are hoping to sell to or tenants that you want to rent to. This means the property will likely get you the returns you expect because it appeals to your target market.
When you conduct thorough research and approach the investment with analytical thinking based in financial factors instead of putting your personal tastes first, it will assist you in finding the best possible properties to invest in. There is not room for emotions in property investment, it about financial returns.
2. Choose Partners Very Carefully
If you are thinking about striking up a business arrangement with friends to invest in properties, this can be a bad choice. If you are a first-time property investor, there are so many factors that you should consider when you choose partners including how comfortable you feel doing business with them and the implications that a partnership agreement will have.
Investing in Real estate can go one of two ways. You stand to earn a good profit or it could be a complete disaster. If you do your research, remove emotions and be cautious from the very beginning then you should be on the winning side of property investment.
3. Calculate Expenses and Profits Before you Invest
You must consider every possible detail before you invest in property. The starting point is to calculate the money that have on hand and the amount that you are able to borrow before you try to purchase an investment property. The next step is to calculate the cost of purchasing and renovating a property while keeping in mind the costs to operate your business, such as debt servicing. You will need to take into account what will be spent on the renovation when you estimate the final price that you will list the property for. You may not realize half of what you estimate as a profit, but it is necessary to do the calculation to get a good idea of the profit you could make so that you stay on budget.
4. Pay off Debts
When you are a new property investor you may need to explore investment loans and you should not be carrying any debt. It is important to pay all debts off so that you have more room to borrow money before you get started in real estate investing.
5. Leave Emotions out of the Equation
When most people are buying a home they tend to follow their heart instead of using logical thinking. This works well when you are purchasing a home where you plan to live for many years into the future but it has no place in property investing. You need to think of the purchase as a business investment and negotiate the best purchase price you possibly can. The lower the price that you pay for the property, the better the result when you get a higher return with it.
6. Gather Your Down Payment
You will require as much as 20% for a down payment when you are purchasing an investment property, it is not the same as the lower down payment required for residential property. The reason for this is that mortgage insurance is not available on an investment property. Investment properties need a larger down payment than a residential home and have higher requirements for loan approvals. The expenses that are needed for a renovation should also be included in your renovation expenses before you make a down payment.
7. Choose an Affordable Home as Your First Investment Property
Even if you have a lot of money to invest, it is important to choose a home that sits in the low to mid-range price for the area you are looking to purchase a home in. You also need to remember that you need to conserve funds for your renovation before you rent or sell the home. Since the home will be your first investment property. You will want to keep your investment as low as possible so that you remain in your safe zone. In the event that you don’t reach the profit you had expected, you won’t lose more money than you can afford to.
8. Research Options for Investment Loans
There are so many available options when you are shopping for an investment loan to purchase your very first investment property. The right option that will make the most meaningful difference to your financial outcome will require you to do all of the proper research. Each investment loan option has different benefits and the best option will depend on what your personal situation is. You need to consider a loan that offers you to the freedom to use the funds for different applications, or a line of credit option, if possible.
Property investing can be a very satisfying business opportunity that allows you to build your money into a fortune if you play your cards right. There is no fast track to property investment, it is something that you need to be in for the long haul.