4 Essential Tips for Investing in Real Estate
Buying investment properties is one of the most common ways to earn extra income. However, many people go into the property business with little knowledge of how to make the most of their investment.
It might seem simple, but investing in real property actually comes with several complications that could cost you a lot of money if not considered in advance. Before purchasing your first buy-to-rent property, consider this essential advice from Buyers Advocate and Vendor Advocate, David Quinn.
1. Take Emotions Out of it
When you buy a home for yourself, emotions play a big role. You'll live there for years, so you need to make sure you're happy and comfortable; however, when you invest in property, this isn't the case.
You'll never have to live in your investment property, so think with your head, not your heart. To make sure you're not getting emotionally attached to your investment, FINE Magazine suggests considering a few important things, including:
● Location
● Consider how much money you can afford to lose
● Potential issues revealed by a home inspection
● Your budget
● Local real estate laws
2. Consider Your Property's Profitability
The final goal of an investment is to make a profit. So, it's only logical to consider the factors that will make your property profitable in the long term, such as the neighborhood you buy in, the size of the property, the local amenities, and outdoor space. Other factors include:
● Property taxes
● Schools
● Crime
● Local jobs
● Environmental factors, such as hurricane, flood, or tornado risks
However, not all tenants are looking to tick every profitability box. For example, young professionals are unlikely to be searching for properties close to schools. So, Buildium notes that it's also essential to consider your target rental market when assessing profitability.
A local Buyers Advocate like David Quinn can help you to determine the profitability potential of your investment property. They will know the area, what buyers are looking for, and how your home matches up to those expectations.
3. Do Thorough Research
It is important to do your research when investing your money. Properties aren't cheap, and you'll be sinking a large sum of money into a real estate investment. Carefully review the current state of the real estate market, paying particular attention to housing supply and demand. It’s also beneficial to track prices on local rentals so you know how much you can potentially earn on your investment.
Consider what the clients you're targeting want. Are you buying a property for young professionals or families? Once you know where you want to buy, you'll know how much money to spend and how quickly to act on a property. Certain neighborhoods are prime locations for investors and, without good research, you could miss a potential purchase.
Also, weigh financial factors, market returns, and where your money is best spent. If your target market is young professionals, don't spend extra money on a property with three bedrooms and a garden. Instead, consider a modern two-bedroom flat.
4. Consider Forming a Company
Australia provides a number of advantages for business owners who choose to structure their business as a company. Firstly, should liabilities be incurred by the business, a company can provide protection from personal liability. Secondly, because corporate tax rates are lower than personal tax rates in Australia, businesses structured as companies may pay less taxes overall.
Finally, Australia boasts an efficient registration process which makes it relatively quick and easy to register your company with the Australian Securities and Investment Commission. For these reasons and more, starting a company may be an excellent choice for those wishing to launch their business in Australia.
Prepare Before You Purchase
Starting in real estate can be exciting, but before you invest in property, make a few preparations. Be sure to remove emotions from the equation, do your research, take profitability into account, and even consider forming a company. If you take a few precautionary steps, you may find that real estate is the right career for you!