When it comes to investing your money into something, property is pretty safe bet. You can make a tidy income through renting the properties you buy, whether that’s on a commercial or residential basis. Unlike stock and shares, where the risk is pretty high, investing in property almost guarantees you a return on the money you have splashed out. However, unless you are a veteran in the property investment business, there are some do’s and don’ts that you need to be aware of.
To ensure you don’t go into this blind, we have some tips in this article that will minimise some of the risks involved. You see, while investing in property is almost ‘as safe as houses,’ there are problems inherent in this business that can see your efforts come crashing down if you don’t adhere to some basic principles.
- Research what it means to be a property investor.
This includes delving into the property market, considering what is available, and thinking about what kind of real-estate you want to get into. You also need to find out what it entails to be a landlord. Do you have what it takes? You can source information online, as well as speaking to professionals in the industry, at public events or speaking to those who work within property management companies.
- Consider the location carefully.
Buying a cheaper property in a less salubrious part of town is fine, but you are not always guaranteed the best tenants, especially on the residential side of things. Buying in a more reputable location will usually secure a better class of tenants (we aren’t being judgemental, just realistic), though there will be higher expenses on your part at the outset. For a more thorough overview of the importance of location, check out what Coach Carson has to say on the matter.
- Think about the tenant you are seeking to attract.
If you are entering the commercial market, there may be some business types that hold a special interest for you. You may have no qualms about renting to something that appeals to you, whereas there may be some businesses you would rather avoid, such as those who appear to follow unethical practices. When considering the commercial side of things, you may prefer to rent to a specific type of tenant, such as young professionals, students, or families. Again, this will be dictated by the location you choose, so buying a property near a college makes sense for the student market, while purchasing property near a school is a good idea if you are looking to attract families.
- Calculate the costs.
Buying property is expensive, so you really do need to budget yourself to ensure you have the means to go forward. You should also have an honest conversation with a bank manager or an accountant to ensure property investment is a viable option for you. The expense to you doesn’t end after buying property. There are all the other costs that come into play, even before your tenants move in. Then there are the unexpected costs, such as having to maintain the property should any damage take place, though there are ways you can protect yourself from some of these. You aren’t guaranteed a quick return on your investment, either. You will eventually recoup the costs and make a profit through rental income, but you do need to be patient.
- Look after the property you buy.
As we mentioned, there will be maintenance costs involved, and even before tenants move in, you do need to furnish the property to a reasonably high standard, be it for residential or commercial purposes. By doing so, you will attract the best tenants, though it should also be a part of your moral obligation. You don’t want to be a terrible landlord, for your sake as well as that of your tenants, as your reputation in the property business will take a nosedive. Remember: word-of-mouth is everything, and people will grumble online and off if they are unhappy with the service you are providing.
- Hire a property management company.
This isn’t a necessity, but there are good reasons for doing so. While there is the added expense, you have the peace of mind knowing your property is in good hands, especially if you don’t always have the time to monitor your property yourself.
- Run before you can walk.
Many property investors have dollar signs in their eyes and invest in high-end properties or buy properties in the overseas market from companies such as Rumah. That’s fine if you can afford it and have committed to the necessary research, but it is sometimes better to start locally and with reasonably priced properties before taking too large a leap. Once you have acquired the right level of experience in property investment, you will be in a better position to extend your reach into bigger properties and the overseas market.
- Purchase a money pit.
These are the properties that are going to cost you a lot more in the long run, due to the high levels of upkeep involved. They can be dangerous too, especially when there is structural damage, so you do need to keep the safety of your tenants at the forefront of your mind. Therefore, don’t be swayed by any cheap offers by possibly unscrupulous sellers, and look out for the warning signs that suggest the property may indeed be a money pit. You will save yourself a lot of time and money if you put caution first.
- Cut corners.
This includes rushing maintenance work, hiring cheap yet dodgy contractors to do any work for you, and arranging paperwork without the benefit of a lawyer to check the wording. Everything you do needs to be legal and above board, as the ramifications will be huge if you don’t. Do everything by the book, be professional, and get the necessary advice rather than relying on your limited knowledge of the business.
By adhering to these basic do’s and don’ts, you have a better chance of making it as a property investor. We wish you every success if you do decide to enter this potentially profitable endeavour.