So you have recently planned to invest in a property?
Are you looking out for ways to minimize the risk?
Here are the thumb rules to help you grow a substantial property portfolio with minimum risk involved.
Before investing in a property
Property investment is a great idea to build your wealth really faster and obviously, it carries risk to a certain extent. So, before you jump into the decision of property investment, carefully evaluate the risks and the benefits associated with that.
The major decision in investment is selecting the right property and buying it at the right time. Carefully research the market to find an opportunity to purchase a property below the real market value. Some of the things you need to take into consideration are:
- The type of property you are investing in (listed or unlisted)
- Analyze your property investment strategy.
- Look for the external factors like cash rate and demand for all type of property.
- See the property as well (structure layout location)
- Go for Professional help
It is highly recommended to consult professionals about your intended purchase. Get advice from property expert, accountants, buyer’s agents, financial planners, local real estate agents, and mortgage brokers to know if that property will represent a valuable investment.
– Accountant: manage the paperwork and help you with cash flow.
– Mortgage Broker: Compare multiple home loans to give you a competitive deal that is a match to your investment goals.
– Solicitor: Prepare and interpret legal documents before you sign the dotted line.
- Make a Strategy and Stick
Create a proven property investment plan aligned with the goal, time frame, and risk. Don’t believe in quicker winning strategies. Some of the pointers you need to involve in your plan are:
(Plan A) Purchase and Hold
In this phase, you acquire property, add high growth, quality assets and then hold them for a long term that gives you capital gains. This cash can be used for the next big purchase.
(Plan B) Purchase, Renovate and Hold
This step has the same steps as discussed above but with one add-on. Here you buy a property in desirable locations (any worst apartment or house) and modify it to increase capital and rental of the property.
- Compare home loans
You can sort out home loans on the basis of their features, such as application fees and maximum LVR. Also, get in contact with a certified mortgage broker to help you select a home loan.
Visit any lender to see who all are offering home loan pre-approval with a credit check. Pre-approval are different based on the lenders. This helps you shop around with a price range, so you don’t fall through when the time comes. It’s important to calculate your spending before you look at different investments and properties.
Look for Investment Property
There are a number of desirable options available on many websites that list properties that are for sale. These websites will allow you to filter your search by price range and property type. You can visit the buyer’s agent that can help you look for something suitable, but their services come with a fee. Although their years of investment experience can help you make a wise decision.
Reduce your Investment Risk
– Cash buffer: always keep some contingent buffer of funds to cover any unforeseen expenses
– Fixed Or Split Loan Rate:
Split Rate – You may want to go for the option of splitting your loan as the market keeps on fluctuating. This allows you to take benefits of lower mortgage interest rates.
Fixed Rate – You can even choose for a fixed rate loan if you want to have peace of mind, always knowing how much you need to pay.
– Invest In Different Areas: A thumb rule is to never put your eggs in a single basket. Invest in different property type across different regions to stay clear of the adverse effect of the economic downtown.
Selling Tenanted Property
It’s very crucial to know the legislative procedures that are involved in the tenanted properties. Some of the best practices to avoid costly mistakes are:
– Give the tenants contractual minimum time period of notice to vacate the place.
– Complete some of the renovations and upgrade the property to increase the sale price when your tenants are not there.
– The downside of doing this is that you might lose income during the time you vacate the place to the date you sell it.
Give Your Target Market What They Want
Property investment business is based on the proposition. You need to have an idea about the target demographic when selling your product. Select a property that appeals to property buyers and to tenants as well. Rental returns will help you manage the mortgage repayments.
Negotiation and Purchasing Process
It’s not enough to just know how to negotiating on the final sale price. There are various contract terms that are an important aspect of property investment. Everything is negotiable in property- right from deposit and settlement fee to final purchase price.
Approach your investment plan with logic as investment game is all about numbers.
Take decisions based on how you want to build a successful multi-million dollar investment portfolio.