Property investment can be a sound business, whether you’re doing it to make a little extra cash or you’re full-time and ready to take the world by storm. But, property investment isn’t for the faint of heart. You’ll need to work hard, know exactly what you’re looking for and identify opportunities quickly. When it comes to property investment, there are certain rules you can never forget if you want to be successful. Keep these points on your checklist!
Location
We’ve all heard the adage ‘location, location, location’, because it really is that important. A buyer or renter isn’t going to even look at a property if it’s in the wrong area. So, the things you need to look out for are schools, public transport and easy access to amenities. If you want to go the extra mile, look into the area and find out if there are any plans for development in the future.
What is the local budget for planning and is there any scope for new investment? Obviously, it will depend on the type of property you’re selling as to what will be most attractive to your client. If you’re selling to businesses, it’s often best for the property to be near other businesses. If you’re selling to families, schools are likely to be most important.
Price
The price is the most important element of making money from an investment property. You have to make a profit if you want your business to survive, which means you have to sell the property for more than you bought it for. There are lots of things that can influence the price you get on a property. The first thing you need to do is know the market climate.
You won’t always be able to wait for the market to be in prime position before you make an offer on a property, but if you have the option of doing so, you could save yourself a lot of money. Alternatively, look for properties that could go for less than they’re worth. For example, auctions or HDB resale.
Similarly, you must always do your research before making an offer on a property. What are similar properties selling for? What are the current market trends when it comes to the type of properties you’re interested in? The more you know, the less likely you are to walk into a bad deal.
Increase the Value
This is where the work comes in. No matter who you’re selling to, you’ll often make more money if you were to buy a fixer upper, rather than a property that’s ready to sell. Although you’ll have to spend more money on the property, simple changes can add dramatic value. So, if you spend 15% of the properties worth on upgrading it, you could add another 30% to its value. Additionally, because the expenses were part of your business, you could be entitled to claim a tax deduction, meaning you make even more money on the property.
Follow Your Instinct
When the property market sees a huge surge, many investors will panic and start buying properties without really thinking about it, out of fear of nothing being left. Don’t be hasty in your purchases. You’ll often get the best deals when the market is quiet, so wait for the opportune moment. That doesn’t mean you shouldn’t buy when the market is busy; just do your research and make an offer with a calm head, instead of buying out of sheer panic.
Watch Property Investment Leaders
Property investment is usually somewhat of a gamble, so you have to learn on your feet. However, it can also pay to watch the people who do it best closely. Find property leaders you admire and respect and follow their decision-making process.
If they jump into the market at an obscure time, it may be worth taking a look for yourself and finding out what the market has to offer at this particular time, even if you don’t buy properties. Leaders with proven track records of success can certainly be learned from.
Financial Planning
There’s no point in going into property investment unless you’re willing to plan financially, every step of the way. Luckily, you don’t have to be a whizz with money to get started. The best thing you can do is hire a financial planner who can help you plan for now and the future.
It’s important that you know exactly how much you need to make for this to work and what sort of investment you need to make to get things off the ground. Many investors who start off on their own and believe they can continue with financial advice fail. Get your financial plan and forecast looked over by a professional so you can set yourself attainable goals.
Know What to Expect
Buying a property can be a complicated transaction in itself, but how does it apply to business? For example, when you’re a property investor, the situation is completely different to that of a home buyer. So, how does buying an investment property affect your taxes? Are selling fees different for a property investor? The last thing you want to do is start your business and find out that you haven’t prepared for fees or that you didn’t know you could claim tax back.
Don’t Sell Straight Away
The property market can change in the blink of an eye. So, although you may be excited at the prospect of buying your first property and selling it on, you have to remember that you need to sell it at the best time, in order to get the most money. You won’t always be able to sell as soon as you’ve finished upgrading the property, and if you do, you could lose money. So, be strategic about when you place your property on the market. Even if the value of the property drops by 5%, that could mean you losing your initial deposit.
Free Land
It’s not often you see free land advertised but it does happen. For property investors, this is a golden ticket. That’s because you can’t lose money on free land. Whether you choose to sell the land on as it is, or construct a property on the land and sell after that, you cannot lose money on it, even in a bad climate. Even if you have to wait a while to sell the land at its optimum price, your costs are low and the potential to sell is high. It’s a win-win, so always keep your eye on every contact and every platform.
Develop A Group of Contacts
You won’t always find what you need to know from real estate agents. It’s important to form a group of contacts you can rely on to give you the news first. It could be that a property is due to go on the market but not yet advertised. It could be plans for new property development site in your catchment area. It could be a couple looking for a new house and one of your properties fits the description perfectly. Don’t just rely on your relationships with real estate agents or other investors to get you through. Make your contact list as big as you can.
Property investment certainly isn’t an easy business option, contrary to popular belief. But if you’re willing to be thorough in your research and prepare financially for the future, you have what you need to get started. Don’t forget to get in touch with a financial advisor before steaming ahead!