Real estate is often seen as a lucrative investment for fledgling and veteran investors alike. It provides several benefits such as passive income, long-term returns, predictable cash flows, and even tax advantages. With the right amount of research, it can also provide you the opportunity to build wealth or even make it into a full-time career. However, like any investment opportunity, it isn’t as easy as many people think it is.
Investing in property also requires investing time, effort, and money to properly manage your property. In addition to that, success isn’t instant, and you’ll have to go through both highs and lows and adapt to changes before you reap the benefits of your investments.
So whether you’re a beginner investor looking for your first investment opportunity or an experienced investor looking to branch out, here’s what you need to know about property investment:
The Benefits of Property Investment
One of the reasons people are interested in investing in property is the benefits that come with it. From building equity to diversifying your investment portfolio, property investments can be advantageous when you do it right.
The Opportunity to Build Equity
Paying off your mortgage loan allows you to build up home equity, often considered as a homeowner’s greatest asset. Simply put, home equity refers to a property’s current market value that changes over time as you continue to pay off the mortgage or if market conditions impact the property’s current value.
The advantage of building up home equity isthat it allows you to refinance the loan towards a new property, sell the home at a profitable price, or even renovate the property.
Protection Against Inflation
Compared to other types of investment opportunities, real estate can help protect you against inflation. This is because when prices rise and the dollar decreases in value, your cash flow also increases. When home prices rise, on the other hand, all you have to do is to raise the rent, so you don’t have to worry about not turning a profit.
Portfolio Diversity
If you’re an experienced investor, you know about the importance of mitigating risk by diversifying your portfolio. And if you’ve already dabbled in different investments such as gold, bonds, securities, and stocks, real estate is an effective way to do so.
Tax Advantages
Investing in real estate allows you tax advantages that can allow you to open yourself up to a variety of tax benefits. You can write off mortgage expenses, deduct your business expenses (which can include your renovation costs) from your taxes, and even take advantage of capital allowances if you plan to rent out your residential property.
With these benefits in mind, you can decide whether you’re willing to take the necessary steps to properly invest in real estate. If you’ve decided to do so, here are a few dos and don’ts to help you get started on your journey to property investment.
The Dos
Assess Your Budget
Like with any investment opportunity, you need to make sure that you have enough financing to get you through your investment. One mistake that many people make is that they consider property investment as their way out of financial trouble. And as much as the media portrays this to be effective, doing so in real life is a big mistake.
Think of property investment like building a house. Without a solid foundation, your house won’t stand for long. The same goes for investing in real estate. If you don’t have the money to finance your investment, you won’t be able to sustain your investment and reap its benefits.
Plan Ahead
If you have the budget to invest in real estate, it’s important to plan out a few things before you go through the process. Consider things like your budget, why you want to make this investment, and what you want out of it, such as becoming a landlord or choosing to buy fixer-upper houses, and the possible risks you may be taking by going through with this new investment opportunity.
Make Sure You’re In It for the Long Haul
It’s important to remember that property investments don’t work the same way other investments do. Not only is the market extremely volatile, but it is also not for those looking for a short-term investment opportunity. Property investment requires a lot of time and effort, and if you’re not ready to go through the ups and downs over a long period of time, it may not be for you.
Do Your Research
As with any investment or business venture, doing your research is a must. If you don’t do your research properly, you’re likely to end up regretting some decisions along the way. Talk to people with experience, such as experienced investors and real estate professionals, and get their advice if you’re unsure about anything.
Books and the internet are also there for your perusal, so study as much as you can on topics that apply to the kinds of investments you want to make, including the wider property market, the different types of properties, and other things you should look out for when investing in a property.
Get a Reliable Agent
You need a reliable agent to help you handle your investment. Before deciding to deal with a certain agent, however, you must make sure they have the necessary accreditation and years of experience to back up their skills.
The Don’ts
Rush
Property investment isn’t and shouldn’t be something that happens in a flash. Don’t take the first deal you see, especially when it seems too good to be true. Take your time during the decision-making process, because being hasty could end up costing you time and money, which will set you back greatly if you end up with a bad property. Assess all the pros and cons of each property you come across before deciding.
Buy a Property without Seeing It In Person
Have you ever bought something online without knowing what it looked like in person, only to get extremely disappointed when it arrives not as you expected? This is what could happen if you don’t visit a property before buying it. No matter what area a property is located in, it’s best to visit it before making your decision. You never know what problems you might come across in the long run if you don’t.
Take All Costs Into Consideration
One thing people often look at when it comes to investing in real estate is the price of the property. While that cost is important, we often forget to include other costs such as renovations among other things which can add up. When assessing your finances, make sure to include the overall cost in your computations.
Settle for the First Mortgage You See
There are a variety of buy-to-let mortgages that are readily available, but settling for the first good deal you see is not the way to go. Your mortgage interest is a crucial factor to consider and important to your business strategy, so shop around for not only the cheapest deal but the most beneficial one, before making your decision.
Real estate investment, with its lucrative nature, can be another good source of income if you play your cards right. As long as you ask questions, do your research, and invest as much time as you can to make the best decisions, you can’t go wrong.
