You may be interested in buying an investment property. Purchasing your first investment property is a big step for any investor. From the first decision to invest in real estate to actually buying your first rental property, there are some important matters to think of.
1. Set Your Investment Goals
If you set financial goals and understand exactly what you want to achieve, you can put yourself in a much better position to achieve financial success. This makes you well prepared to purchase a property that lines up with your goals.
2. Find the Right Property
The sort of property you want to buy will help to determine the level of rent you can receive and may involve different upfront and ongoing costs. When it comes to property investing, size does matter. One- and two bedroom apartments attract a high amount of rent per m2 and more tenants are looking for these properties. It will be easier to find a good tenant.
3. Research The Areas
It’s so important to understand how the area is going to perform in rental returns and in capital growth so you know that you’re buying a solid investment. Find out as much as you can about the neighborhood. The key is to research areas carefully, looking at important factors like population growth, tenant demand, local price growth and any developments planned for the area.
4. View Potential Properties
Viewing and analysing different properties in the right area(s) means that you can get a better understanding of what properties are actually worth and you can ensure that you buy a property that is going to move you towards your financial goals.
5. Don’t get Emotional
When it’s your home there’s obviously some emotion involved there. You have to look at buying an investment property as a financial deal. Use your head, not your heart.
6. Calculate Operating Expenses
There are a lot of expenses associated with investment property that you need to consider before you invest. This includes everything from transfer tax, council taxes to property management fees to insurances and many others things.
7. Determine Your Return
You need to analyse all of the expenses of the property and all of the income, you’ll need to consider the return on investment (ROI). The ROI can be calculated by first finding the property’s net annual income. This is the rent price that’s left over after you’ve paid the taxes, property management fees, insurance, expected repairs and potential vacancy times.
8. Use a professional renting estate agent
Consider working with an experienced partner on your investment property. They will screen your tenants carefully and keep an eye on your property.
9. Renters Can Do More Damage Than You Realize
A lot of damage can happen in a short amount of time if you allow it, and the only way to prevent this is to visit your property on a regular base.
10. Repairs Can Be Unexpected
Over time, maintenance expenses tend to average out but a smart investor will create an estimated budget in order to prepare a reserve fund to cover unexpected bills. If you reinvest a portion of your rental income into performing monthly maintenance you can keep your property in good condition and your tenants happy. Most investors spend 1% to 2% of the purchase price of their investment every year for routine maintenance.
Purchasing property can be a great step towards securing your financial future. Would you like to learn more about buying a property? Give us a call and we are happy to assist!