Dipping your toes into the shark-infested waters of investment properties can be a rather daunting concept. We all know that owning an investment property can be a great way to protect your future financial stability, but very few people are aware of the best strategy to take when searching for a building to purchase.
While it may take a bit more effort to do the due diligence in the beginning, it will help you to make the right decision and ensure that the rest of your investment journey will be as smooth as possible.
Do your research.
The most important thing to do before purchasing your first investment property is to ensure that you understand the costs, benefits, and risks involved. You need to consider whether you are best to enter into the commercial property sector, the private/residential sector or property with mixed-use zoning and you should always do your research about what kind of tenants and obligations you are likely to have.
These will vary depending on factors such as location, property type and even how much you have to borrow to make your real estate dream a reality, so it pays to consider all facets thoroughly before putting any money down.
Work with a professional.
Once you’ve established your portfolio and have a few properties under your belt, you may find that you are comfortable self-managing your investments. In the beginning, however, it is highly advisable that you work with a financial advisor and real estate agent that you can trust to ensure that you are completely informed about your new purchase and how it will fit within your budget.
For example, you should understand how your new property will affect your income and taxes, what kind of maintenance you’ll be expected to carry out and full details about the property you are considering purchasing.
You may also want to enlist a property manager to oversee your rental property after purchase. You can score some bonus points here by working with your financial advisor to look at your overall financial situation and help you boost your savings.
Not just what, but where?
Another important facet to consider is where you would like your new property to be. While it may seem logical to invest in a thriving city, a regional or rural property may fit better with your financial situation. You should also consider whether you plan to make use of the property as a holiday home or retirement option further down the track, as this will greatly affect your location choice.
Your financial circumstances may not allow you to be choosy when you are considering property location, however, if you can, thinking outside the box, or in this case, outside the city, may prove to be quite rewarding. Suburbs that are currently experiencing growth are generally a sound investment.
Now that you’ve selected your new property, it is essential to have a few checks completed.
In addition to the requirements outlined in your purchasing contract, you’ll want to get a building inspection done to ensure that everything is up to code and that any required alterations won’t break your bank.
You’ll also benefit from having a pest inspection done. The last thing you want is to have new tenants move in and complain a week down the track about cockroaches or end up with structural damage thanks to hidden nasties like termites.
Speak with your advisors to see whether there are any other checks that you should complete and don’t be put off by the price. While these things may hurt your account balance a little, they’re far better than finding out later that you have some significant issues.
Investing in your first property is an exciting time so don’t be deterred—do your research and you will soon be the proud owner of your first investment.
Photo by Gus Ruballo