Real estate has produced some of the wealthiest people in the world today. You can check some of them out on Investors Hangout and get inspired. Real estate increases in value and is more stable than stocks making a property a substantial investment that can grow your wealth over the long term.
However, as with any investment, it’s important to weigh all your financial options carefully before you purchase your first property. Buying a property means investing hundreds of thousands of dollars. Therefore, a small hiccup can cost you unsurmountable stress, anxiety, and heartache.
We have crafted this article to help arm yourself with the right information before starting your career as a real estate tycoon and to help you move forward in your investment journey.
Several risks and rewards come with investing in a property. Here, we will name the top three on each category.
- Steady passive income
- Real estate value increases with time, so, your investment should also grow
- Your rental income is not subject to social security tax
- Involves massive cash investment
- If you’re unlucky not to find a tenant immediately, you’ll have to pay for all the expenses
- If the market goes sour, you can’t sell your property instantly
Here are some factors that you need to consider when choosing the right property for your portfolio.
1. Find the Right Location
Your potential investment location should be a place that is well known to you but not necessarily your neighbourhood. The area of a valuable property should feature low crime rates, plenty of amenities like malls, movie theatres, schools, parks, and restaurants.
2. Determine Your Return
Various investments have different cash-on-return. For instance, stocks pay 7.5%, bonds pay 4.5% while a property will offer a 6% return on investment.
The return on investment on a property will grow over time, making property investment the best option.
3. Low Maintenance Property
Operating expense of your new house can be high ranging from 35% to 80% of your gross operating income. Homes with pools and manicured gardens require a lot of time and care while a similar one on a smaller block will be easier to maintain.
4. Beware of High-Interest Rates
Look for a low mortgage interest rate that won’t eat into your monthly profit. You need to be cautious and make your calculations so that you don’t carry debt as part of your investment portfolio. Also, keep an eye on rental yield trends especially if your cash flow is tight.
5. Know What Tenants Want
Know what appeals to people so that your property will be a favourite pick of those who are actively renting in that area. If your market comprises of families, a house with a grassed backyard would be an ideal option. On the other hand, small units may be more affordable for a local market with single individuals.
Before you plunge into property investment, do your homework. You’ll need to choose the right one for you, maintain it and deal with your tenants. Renting can generate a steady monthly paycheck- but it all takes work.
- FRANCHISE WITH LOW STARTUP COSTS: FIVE WAYS TO EARN MORE FROM YOUR INVESTMENT
- NOT YOUR AVERAGE INVESTOR? TRY THESE INTERESTING INVESTMENTS
- 5 INVESTMENT APPS TO HELP YOU REACH YOUR FINANCE GOALS
- HOW TO GET THE MOST BANG FOR YOUR BUCK WHEN BUYING A CAR
- A MILLENNIAL’S GUIDE TO FOREX TRADING