Five Tips to Buy Your Best-Fit Investment Property
For a wise investor, an investment property can act as a springboard to financial freedom. However, it is not always easy to earn a big return on your investment. You need to use strategic thinking while purchasing and choosing an investment property to build wealth and secure your financial future. Bear in mind that the way you manage your investment will decide whether your investment property can help you meet your financial goals or not.
Here are five key tips that can help you buy the best-fit investment property:
1. Have Clear Investment Goals
It is imperative for investors to set financial goals first and then move out to purchase an investment property. If you are interested in passive income, buying a negatively geared property will not make much sense. Similarly, if you are eyeing fast capital growth, purchasing a property in a rural area may not help you achieve your financial goal.
Setting clear financial goals and understanding what exactly you want to achieve can put you in a better position to attain financial success.
2. Look for Price Appreciation in Future
Investors seeking capital growth should choose a property that has room to increase in value in the coming years. An ideal approach is to acquire a property below the real market value through patience, research and timing that can provide immediate returns.
In case you are unsure of the real value, you can seek the help of a lender who can arrange for a separate valuation of the property on behalf of the bank. This information can help you negotiate well for the chosen property.
3. Location Matters
While investing in a property, location is the most crucial factor that usually translates into profitability for the investment. Location tends to create the desire for purchasing the property, which in turn fuels the demand that causes a surge in price.
Besides, areas close to transport hubs or with sound infrastructure also yield higher rentals. You may find a property in an inferior locality at a lower price, but there will be eventually lower rents, lack of demand, and lower sale values.
4. Understand Cash Flow
In many instances, investment properties tend to produce negative cash flow. This means that at times the rental income is not able to cover the generated expenses owing to factors such as wrong rental strategy and rental price.
Besides, investors often put excess money on aspects such as furnishing, utilities and renovation. And at times, people fail to focus on necessary upkeep, leading to huge expenses later.
Having said that, as there is no guarantee that tenants will always be there in the property, it is important for investors to ensure that they can afford to maintain their mortgage repayments over the mid to long-term before making an investment. One need not miscalculate cash flow while being over-optimistic about rental income or assuming full occupancy to evade potential problems. Besides, careful strategy on the rental price and property maintenance is also important.
5. Pick the Right Property Manager
Purchasing a property requires a substantial investment of your hard-earned money. It is, therefore, crucial to think in advance how your property will be managed in future to secure the best possible value from it. Towards this end, investors can utilise the services of a professional property manager, whose job is to keep things in order for you as well as your tenant.
A good property manager can offer advice on property law, acquaint you with your rights and responsibilities and help you ascertain the rental income you can hope to draw from the property. A property manager can also minimise your stress while helping you find the right tenant, undertake reference checks and ensure the rent is paid on time.
While property prices are soaring high, focused- decision making on different critical aspects is needed to safeguard your long-term property investment. These tips can help you determine whether it is a good idea to take the leap when you come across a lucrative investment property.
This piece is kindly supplied by: Kunal Sawhney is the founder and CEO of Kalkine. An accomplished financial professional, he has extensive expertise in equity markets and adopts quantitative and qualitative stock selection practices.