Essential tips to help you succeed with property investments

Essential tips to help you succeed with property investments
Photo: Stasique, Bigstock

Investing in property can be risky business if done without adequate research and often the risks and potential difficulties are underestimated. Quite often landlords will invest in rental property expecting a steady stream of hassle-free income, but it’s not always as simple as this.  Making the right decision and picking out the right investment property can help you achieve the goal of financial independence. It all comes down to research and preparation to make sure you make an informed decision about property investment.

If you are looking to purchase an investment property, whether it’s your first or you’re experienced in the area, there are a few things you need to keep in mind to give you every chance of success.

Get organised

Before you decide to invest in a property, make sure you have a good grasp on your finances and spending ability. What kind of price range are you working in? Coming up with a budget is an underrated part of the process. Decide how much you are willing and able to invest and have pre-approval of the loan before you actually sit down and negotiate the purchase of the property. This not only gives you a reason to be confident heading into negotiations but also gives you bargaining power as you know exactly where you stand.

Make a plan and determine your strategy

Property investment should be treated like a side business because ultimately that’s exactly what it is.  Property is a huge business and when you look for a property as an investment price is the first thing you need to check. Come up a business plan that takes into account growth moving forward. This will help you focus on the ultimate goal rather than letting minor setbacks, which are inevitable, take their toll and disrupt the process. Establish what kind of return you’re looking for and when this realistically can be achieved given your time and budget.

Location

Obviously, location plays a big role in determining property prices and the potential future value of an investment. If you buy a property in an area that is growing, expanding and becoming more sought after, chances are the price will rise more quickly. But often when an area’s potential is obvious, this is factored into the current price. It’s all about being one step ahead of the market and making predictions about which areas are set to take off.

The experts advise that you look for properties close to schools, markets, recreational facilities, parks and other such local areas. These are generally the places with the highest property growth rate, so you can be confident about these investments despite the fact that they are more expensive.

Rental property insurance

Property insurance is obviously a necessity to protect your investment. There are a lot of things that can go wrong with a property that can seriously harm your investment, so having a quality rental property insurance policy is advisable to protect yourself. Choosing the right policy isn’t just about price, it’s also about the level of cover that’s offered. Keep in mind you can always chat with an expert if you need help.

Have a good understanding of the market

The successful property market investor does their homework. Market research is an absolute must if you’re going to be successful. Being aware of current trends in the market, such as spending habits and consumer behaviour can help investors make the right kinds of decisions and open up investment opportunities.

Be conscious of your budget

People that have recently entered the property investment market or those without a great deal of experience will often underestimate the additional costs associated with purchasing property. Make sure you take into accounts the costs of investment, which may include legal fees, stamp duty, property inspection cost and mortgage costs. There will also be ongoing utilities and maintenance expenses that can be easily overlooked.

Invest for the long term

Investment property should be treated as a long term investment rather than a means of generating a quick buck. As an investment class, property sees considerable growth in the long run, so cashing out quickly is never a profitable long term strategy. Further, if you’re always looking for a property that you feel will jump up in price very quickly, likely your investment is highly speculative. This kind of property investment is often unsustainable and exposes you to potential loss with high costs of entry and exit.

Ignore what everyone else is doing

It’s an old investment adage; buy when everyone is selling and sell when everyone is buying. Unfortunately, it’s easier said than done. Identifying the right time to buy and the right time to sell is not easy, but you should not necessarily be following what the rest of the market is doing. This kind of behaviour can lead to overreactions and reduced profit in the long run.

Property investment is a highly stable asset class that can be very profitable in the long run. While there are barriers to entry and a large number of costs associated with buying, maintaining and selling property, the potential for growth is always there.