When you want to build a safety net for your retirement in the future, property remains being considered one of the safest long-term investments out there.
Some investors might want to build a property and immediately rent it out – while others prefer to live there during the renovation process. Either way, investing in properties can be an excellent method of creating wealth, but there are a few golden rules you should consider before you go for property investment.
- Know Your Budget
Before you invest in a property, it’s essential that you understand your cash flow properly. Make sure to ask your bak for a pre-approval for your investment loan, so you can be sure of how much you can borrow before you begin property hunting.
- Do Not Underestimate Your Ongoing Costs
It’s extremely important that you budget for insurance, general repairs, and rates. When you purchase an investment property, do all that’s in your power to prevent expensive maintenance issues from arising – replace aging taps, for instance.
- Buy In Growth Areas
Do your best to pick an investment property in a location where there’s a strong rental accommodation demand. Pick a property close to universities, schools and transport, since it’s a lot more likely to be attractive to renters.
- Be Realistic About Investment Goals
Do you want to hold your property long term, or are you looking for fast capital growth? In a boom period, it can be quite easy to renovate a property and turn it over for quick profit suggest Scottsdale Realtors Kay Grant. In a slower economic time, it can take years to achieve a similar growth.
- Get Equity Through Sweat
Paying a tradesman to renovate an investment property can cost a lot. If you’re willing to get your hands dirty, it can save you money and increase the profit margin, as you’ll be doing the work yourself.
- Don’t Look For Luxury
You want a rental property that’s liveable – that is, clean and functional. There isn’t much point buying a property just because of its stylish interior.
- Be Rational, Not Emotional
When you’re hunting for a home, you may end up buying with your heart instead of your head. It’s a common mistake, so make sure to weigh up every relevant pro and con. A home on a steep block, for example, might have a stunning view, but it could be very hard to renovate due to potential retaining/excavation costs.
- Think Very Carefully Before Go Into Negative Gearing
If your rent does not fully cover repayments on the investment loan, your property is going to be negatively geared. This can have some tax advantages, but it may lead to serious financial stress if you don’t have the cash flow to cover rates, the repayments, or body corporate fees. Carefully consider your budget before going through that.
- Are You Paying Off Your Home?
It’s not necessary that your home is fully paid before you buy an investment property, but it’s very important that you’re comfortable with your current level of debt. It’s best to have your large portion of your home as well as other debts paid off and under control before you start.
- Have The Building Inspected
Before you sign a purchase contract, take some time to understand the building report, so you can avoid potential expensive repairs later. Termites, for instance, are an important problem you should watch out for.