Some people make the business of investing in properties sound like a completely foolproof way to make a lot of money fast. However, it’s important to understand that this business carries risks like any other, so you should approach it cautiously.
Moreover, it’s important to mention that investing in real estate will require you to have a significant budget up front so that you can seize the moment and make a purchase when the right opportunity presents itself. Aside from this, there are a few more basic rules you need to be aware of before you get into the investment property game. Here they are.
Control your emotions
First and foremost, you should never let your emotions get the best of you. When buying a property, you need to listen to your brain, and cold logic, before you listen to your heart. However, some people find this extremely difficult, especially if they are new to the business. It is also important to remind yourself that you are not buying the property for you to live in – you are simply making a business investment so you should always go with the most probable option.
Just like in any other business, you need to research everything before you invest. You first need to determine who the audience you wish to target is which will make choosing the property to invest in significantly easier. Furthermore, always try to go with the property that’s in the location your potential clients will find attractive. Go for areas that have a lot of growth potential and choose investments that are most likely to reach the returns you are expecting. Proper research and, again, thinking with your brain – not your heart – will ensure that you invested in the best possible property.
Don’t go crazy with your first investment
Now, even if, by any chance, you have millions and millions to invest, for your first-ever purchase you should always go low-cost. Look for properties that are in the low- to mid-range price span. If you are not sure you can identify them on your own, as a professional to help you out. For instance, investors from Australia always choose to play it safe, so most of them consult with a buyer’s agent from Sydney before they make a purchase. The reason behind this is the fact that you will still have to spend even more money to repair and renovate the home before selling – or renting – it, so it would be wise not to blow your entire budget on a single investment.
Secure your down payment
When buying your first investment property, do know that the down payment you will be required to make will be significantly higher than the one you have made on the house you are living in. If, for example, the down payment you’ve made on your first home way about 3%, the down payment you will be expected to pay for your first investment property can go as high as 20%. The reason behind this is the fact that mortgage insurance cannot be applied to investment properties.
Calculate everything beforehand
Finally, before you actually buy your first investment property, you should write every expense down. Start off with your budget. Write down how much money you have at your disposal and how much you would be able to borrow (if necessary). From that, subtract the costs of purchasing, renovating, furnishing and decorating the newly-bought home as well as the operational costs. Finally, determine for how much you will have to list the house so that you make some profit in the end. If by some chance, your calculations don’t turn out great, i.e. you will waste more money on the property than you stand to gain from it, it might be wise to give up and continue your search.
Just like in any other business, investing in real estate can go either way: it can either significantly boost your income or it can quickly turn into a nightmarish scenario. However, by doing some research, asking for help when you actually need it and calculating everything beforehand, you will considerably boost your chances for success. Therefore, make sure you do all that’s in your power to prepare accordingly and let the faith take the reins from there on out.