Running the Risk with Property Investment
If you’re thinking of investing in domestic or commercial property, you’ve probably got some good ideas behind you and perhaps a nifty real estate development software tool to help you out. But how much risk do you want to take? A lot or a little? Take a look at these 5 property tips that will help you if put you on the right track for success!
1. Research the area
If you’re going to buy in a particular area or you just don’t know which area to start in, you will want to look for the key signifiers that will tell you whether this spot is brimming with capital growth. Research the historical market trends and do some investigations on similar properties in the area. Generally speaking, you are better off going for anything that is close to transport, schools, universities or amenities which will continue to give you a strong return on investment.
2. Be wary of interest rates
Interest rates can sometimes be a savior or a killer, but they will always go up and down, so you’ll need to keep an eye on the economy and make sure you do your calculations correctly. If you’re buying when the rates are down, take into account how much you’ll be paying if they go up and stick to a loan that has low interest and options for fixed or variable. Whatever you do, you main aim is to also make sure that your investment is affordable, especially if you’re new to the investment game and don’t have a lot of experience.
3. Rental or leasing issues
Rent is also something that you’ll need to consider and this also comes from conducting your research. Properties in more valuable areas will obviously gain you more rent and again the demographic will be important here. An area close to a university, for example, might get you consistently high rental return, but don’t expect students to keep your place in pristine condition. You’ll also need to take into account whether you want to negative or positive gear your property. Both are worthwhile, but will mean different things for your risk. Negative gearing means you can offset your loss against your tax, but it also means you’ll be responsible for covering the loss. Positive gearing is great for earning you more income, but bear in mind you’ll also have to pay tax on this.
4. Look at your costs & expenses
If you have a property valuation software tool, it can be great to help you manage your cash flow and expenses. However, you can also do some simple sums based on what you already know, to give you an idea of your expenses vs. your budget. Have you taken into account your financing fees? Any costs associated with building or running the place? Costs of maintenance and repairs and any strata and council fees? Find out everything you can about the associated costs and expenses of an investment to ensure you don’t end up getting any nasty surprises.
5. Get some advice
Finally, before you even think about taking the plunge, it’s imperative to get some advice from a professional. Property and real estate agents can help you understand the market and what to look for, and if you don’t have an accountant, you will definitely need to get one. Accountants and agents are crucial when it comes down to the nitty gritty task of investment and will ask questions that you probably haven’t thought of. What if you lose your job? What if your property gets badly damaged? You can also have a look around to see what other property developers are doing and attend seminars and lectures to keep you informed. If you’re unsure of things, you can also get a second opinion from a professional, just to make sure you’re on the right track for investment.
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