Picking The Right Investment Property For You
In this day and age, investments are a bigger deal than ever. The economy seldom allows the average citizen to earn or save up enough to invest their capital into something substantial.
So it’s vital that whatever you put your money into yields the best possible ROI (return on investment). This requires careful thought, you need to do your research and figure out exactly what you want, and how you can extract the best value out of it.
But before we dive into how you can pick the right investment property for you, let’s talk about your goals. Your goals for your property will help you better determine what property will work best for you. Investing in your property is often motivated by a combination of these goals.
Here are some examples of what investors typically want to get out of a rental property.
1. Growth Value
Many people invest in properties that are projected to increase in value over time. This capital growth means that your property’s value goes up from the time you buy it to the time you sell it. This is why we often see investors putting their capital into developing areas in their city. If the projected value is good, it’s typically a good investment.
Choosing a property that isn’t currently in demand but is expected to do so is suitable if capital growth is your goal. Research and look out for demand cycles in your city’s areas and make your choice accordingly. Demand and thus, value, rises and falls so looking at value projections is essential.
2. Cash Flow
Cash flow refers to how much money goes into and comes out of your investment. Ideally, you should be making considerably more than your investment into your property to sustain a living for yourself.
A positive cash flow means that your monetary yield is greater than your investment. As opposed to this positive gearing, negative gearing refers to your yield being less than what you’re putting in. Ideally, the property you invest in should help you cultivate a positive cash flow to help maximise your passive income.
3. Rental Profit
This is one of the primary goals of investing in a property. Ideally, your annual rental yield should justify your investment and maintenance cost for your property.
When investing in real estate, take the time to do the maths. This means calculating your net rental yield which calculates tax payments, payable interest, mortgage, strata fees, and comparing it with your earnings.
Rental yields are also unreliable for the most part, profits fluctuate based on supply and demand, so it’s different in every cycle.
Common Questions to Ask When Investing in Property
Now that we’ve discussed an investor’s goals, let’s get into how you can pick the right investment property for you. Here are some questions to consider that will help you make your decision.
1. What Type Of Property?
The first thing to consider is the type of property you’re looking to invest in. Are you buying a single unit? An apartment building? A house?. It’s also important to consider the nature of your rental property; is it a restaurant space? A studio? A holiday or vacation rental?
Answering these questions will help you determine what boxes you need to check off and how much time and investment you’ll need for the upfront cost and maintenance. Some rental properties require more and more frequent maintenance than others so the type of property you choose is a big deal.
2. What Is Your Property’s Location?
The location of your investment property matters for several reasons. Firstly, the location of a property determines your cash flow, capital growth and rental yield. A ‘good’ location will attract more tenants, boosting your profits. Similarly, a high value rental location will grow in value over time, increasing your capital growth.
It’s also essential to think about how convenient the location is for you as the landlord. Often people choose locations closer to where they live, so it’s easier for them to manage their properties on-site. However, a high-yield property being close to you is not always the case. In this case, it’s best to hire a property manager.
3. Why You Should Hire A Property Manager
A property manager is a professional who manages your rental properties. They overlook rent payments, evictions, finding tenants, leasing units, and also managing maintenance on site.
Your property manager not only brings you ease of mind for delegating the day-to-day responsibilities concerned with your rental property. More than that, they bring unique experience and knowledge gained from years of working in the field and attaining certifications to do the job properly.
Hiring a property manager through an agency is even better {suggestion: insert link to your website’s main page}. An agency already runs the necessary background checks on their property managers, so you don’t have to. You’re more likely to hire someone more reliable and trustworthy through an agency, especially since there is an agency to hold accountable for any mishaps.
4. What Are You Offering Your Tenants?
Lastly, choose a property that offers the kind of perks and amenities that will appeal to your target tennants. For example, if you’re renting out residential units, it’s advisable to install air conditioning, a laundry room, lockers, and a parking space. These features attract tenants and will increase the rent per unit of your property and overall value of your property.
Moreover, it’s essential to make necessary renovations that spruce the place up before putting your rental on the market. For example, if the paint is chipping, or the plumbing is faulty, or the floor tiles are faded; take the time to fix everything up. Your initial investment will pay off in the long run.
Research!
Ultimately, it all boils down to research. Do your due diligence when choosing a property to invest in. Look up properties near or in your area, look at value projections and statistics to make the most informed choice. If you’re new, getting advice from a professional or someone with more experience than you will also help.