Property investment requires a lot of knowledge, patience and strong nerves. But once you master all the principles and build up your portfolio, it provides financial security that has you set for life. There are many strategies you can follow depending on your market opportunities, but here are four essential rules you should always keep in mind.
Location usually makes up about 80% of the value of any real estate. Therefore it’s also one of the most important factors to consider when investing in property. There are two things to keep in mind when considering the location. The first and most obvious one is how the location is connected to the most basic human needs. Properties with good nearby schools, convenient stores, shops, and good job opportunities will always be in demand. Price alone is not the main factor that determines how much income you get from real estate. If you want to invest more money, you can always buy more properties. What you need to keep in mind is how fast you can rent out your property. If the property is without tenants that are paying rent, you are losing out on your investment. So be on the lookout for locations that provide as many utilities as possible, and you will get more diverse groups who will potentially be interested to rent from you.
The second aspect of location has to do with areas that are “booming”. Sometimes, certain areas undergo an economic or development boom and that will lead to higher rental demand. The boom will not last forever but usually even after it ends, the value of the properties remains high. Therefore it’s important to spot those regions early on and buy your property right away while the prices are still low. As you get more experience in the business of property investment, you will also develop the skill of detecting which areas are developing and experiencing a boom.
A common mistake people who just start out as property investors make is buying old properties because they are cheap. The idea is to buy cheap, run-down places, and renovate them to get the prices up. There is nothing wrong with buying cheap property. In fact, it’s usually a good idea to buy a few cheaper properties instead of a single expensive one. Like any good investment, it’s better if you diversify. But buying old real estate is never a good investment. Once prices start going down, they usually never go up again. You can try to freshen up your apartment but the building and neighborhood will still remain the same. Because of that, even if you invest a lot of money in an old apartment, the price itself will not go up a significant amount, making the time and money you spent not worth it. That’s why investing that money in a newer apartment is a better idea.
This is true for all business ventures and should be applied to property investment as well. Never start out with a know-it-all attitude. Instead, keep an open mind and try to learn as much as possible along the way. Surround yourself with people who have more experience than you and don’t hesitate to ask for advice. You will be surprised how many people will be happy to share if you just ask nicely and show respect and gratitude for their knowledge. If you don’t know people who have experience with property investment, you can join property investment seminars and learn from people who not only have knowledge but are also good at teaching others.
The idea of property investment is to build up capital that provides you with a constant and reliable income. You should never buy with the intention of selling, instead focus on buying a property that you can hold on for as long as possible and rent it out for a good price. There are many reasons why selling is a bad idea. The first one is that the value of money always goes down while the value of property usually goes up. Just having more money won’t make you earn more while having a real estate is a potential for extra income. The second reason is that selling itself is a costly business. If you sell a property, you will have expenses like capital gains tax and agent’s commissions. So in order to profit from buying and selling a property, you would have to sell it at a much higher price than you bought it for, which is just not realistic.
There are always more things to learn and new ideas to explore. But make sure to keep these four rules in mind and you can look forward to a financially secure future and a nice retirement plan.