An investment property means exactly what it sounds like: A property you buy simply with the aim of making money from it. It could be through outright sale to make a good profit, but usually, the money is made through leasing and rents.
Investing in property is a very viable means of income, especially as a passive source. The property market is a very well-structured one. It has established processes and some laws are in place to ensure that business activities go on safely. Banks and other financial institutions put a better value on land and property in comparison to some other assets.
Investing in property can quickly become a very expensive enterprise to start. When we take into consideration purchasing the property, quality inspection, maintaining the acquired property, taxes, and the usual legal expenses, this becomes obvious. As such, making the wrong decision to invest in can be disastrous.
The following steps can help in setting you on the right path on your journey into your new business interest.
- Have a specific reason(s) for investing in property.
If your reason for venturing into property goes something along the lines of: “An old cobber of mine does it and it looks really cool”, you probably should have a serious rethink. Things such as whether property investment is something that can suit your lifestyle should be considered. Being highly solvent and wishing to checkmate inflation causing a decrease in your money’s value could be a good place to start.
- Research the market
This will help to clarify the profitability of any potential investment choices. Determine such things as location, type and size of the property, its market value and desirability in the long or short term. There is no point sitting on a goldmine nobody wants to buy for some reason, be it legal or other. You should also determine whether you might need to acquire a loan to finance your purchase. A loan requires having good credit. Visit the Securities and Investments website at asic.gov.au for detailed information.
Check out local opportunities as well as outside of your community when researching. That way you can gather more information and familiarize yourself with what is around and available to you. Something to consider is whether you’ve got an apartment, townhouse, house, land or development in mind.
If you’re a New Zealand resident, a good idea is to start at places like Progressive Property. They have a wide selection of townhouses, house & land packages and much more.
They cater to people that are looking for their first home or even looking for an investment property too. For more information on what they’ve got available you can read more on their website at: https://www.progressiveproperty.nz.
- Make a budget and stick to it
Sounds typical but something else to consider with a budget is to include a macro budget and a micro one. The macro budget would include such things as legal fees and the capital intensive expenses, like the actual cost of buying the property. If you cannot immediately finance an outright buy, the deposit required is usually a minimum of 10 to 20% of the total price.
The micro-budget should include such things as recurrent expenses: Interests on any loans taken, the cost of maintenance and repairs, water, gas and electric, taxes, etc.
- Have a schedule for your goals
It is a salient practice to be mindful of what you wish to achieve in the purposes of investing and when you should have done so. Timing is everything in the property investment domain. Emerging deals are always coming up and market rates are often changing.
- Evaluate whether a caretaker/property manager is needed
If you would rather not do the face-to-face interaction with a prospective tenant or lessee, you might wish to procure the services of a third party. The advantage is that they would be acting from a more detached and rational perspective. They would seek to get the perfect balance between client agreeableness and the best obtainable profit.
- Consider if you need an insurance plan
When all is said and done, consider whether you need a buffer in case of the undesirable circumstance where things could go under. Government policies, deaths of clients, or natural disasters can render a once-promising investment into a burning shipwreck sinking its way to the bottom of the sea.
After you’ve done the research and think you meet the criteria