This is a guest post by Elizabeth from Dynasty Partners.
Are you thinking of investing in property?
Investing in residential or commercial real estate can be very rewarding. Plus you could get significant returns in the years to come if you invest wisely. Sound’s good doesn’t it? However, it’s no game, and you need to thoroughly understand the market, stay informed and have your finances in check before you dive straight into it. Here are five lessons that I’ve learned working in property investments.
Ensure You Have Adequate Finances
Before jumping head first into property investments, you need to take a look at your finances. Make a note of your expenses, income and even assets so that you know exactly what you have and what changes you need to make to have enough capital. Plenty of successful property investors save up money as they build up a strong portfolio and invest in properties as the years go by.
You also need to be able to understand your tolerance to risks. One risk includes not being able to get your money out of the investments so quickly because property tends to take a long time to sell. The second is the time and money spent on maintaining and managing your property, and the third is the chance of your property depreciating, which would lead to you losing out on capital gains.
Assess the risks involved and figure out if you’re willing to take them. Determine whether you will invest in property with your own money or take out a loan. If you have a good credit history, taking out a loan may be easier for you.
Having adequate finances will give you more freedom and confidence to invest in property successfully.
Start With Residential Properties
Residential properties are appealing to many investors because they tend to be easier to buy, maintain and manage compared to other types of properties. Plus, residential properties deliver monthly rental income, as well as capital gains. To achieve capital gains, you could find residential property in locations where you think prices could increase or buy houses below their market value.
If you own your home, you most likely already have experience in finding and buying a house. However, one thing you must always remember is that you are buying the home for others to live in and not yourself.
One mistake I made when with one of my first investments was letting my heart rule my decisions. I was in love with the intricately designed garden in the front lawn of a cute cottage. It turns out; most people want clean and easy. It took much longer for the little house to sell and it sat on the market for longer than any of my investments.
It’s understandable if you are buying a home for yourself to live in, as it should be tailored to your taste. However, when investing in property, it is something that should be avoided at all costs. Use more logic and less emotion, as you’ll be more likely to find the house that’s right for business.
Gather a Team of Professionals
Getting started in property investing is an awful lot of work, and if it’s your first time, you are definitely going to need some support because handling everything yourself could be very stressful.
As a first time investor, you may need the professional assistance of a solicitor to help you with all the legal aspects of buying and investing in property such as licenses and contractual agreements. An accountant may make book-keeping easier and help you sort out taxes while a financial adviser could help you achieve long and short-term goals.
Have a Plan
Having a bit of strategy can give you a clear sense of direction and let you see how you are progressing. Good plans will generally involve your goals and ways you can reach them, as well as strategies for risk management and government concessions that would be beneficial to you. It can also include a budget for short and long-term necessities and goals that require funding. Having a plan can help you stay on track and reach your property investing goals quicker.
Stay Informed
Having a good idea of the market can help you make better investment choices. Trends change all the time, and it could impact your investments, so it is important to be able to predict and forecast changes in the industry. I use this site to keep up to date with the latest trends.
Part of being well informed includes staying safe. So this means avoiding pesky get rich quick schemes because they usually turn out to be a waste of time and money in the end. Be aware of property peddlers who claim to be able to give you huge returns overnight. People like that always turn out to be scam artists.
Start with Residential Properties
Residential properties are appealing to many investors because they tend to be easier to buy, maintain and manage compared to other types of properties. Plus, residential properties deliver monthly rental income, as well as capital gains. To achieve capital gains, you could find residential property in locations where you think prices could increase or buy houses below their market value.
If you own your home, you most likely already have experience in finding, buying and operating. However, one thing you must always remember is that you are buying the home for others to live in and not yourself. Look for convenient floor plans, state of the art appliances, and décor to suit all tastes.
Investing in property has turned out to be a great venture for many people. Ensuring you have enough finances to cover the costs of buying, maintaining and managing a property, along with keeping informed on the latest news in the industry, will increase your chances of being successful in investing.
Elizabeth is on the content team for Dynasty Partners. She enjoys decorating homes, hiking, hanging out with her family, and volunteering at the animal shelter in Des Moines, Iowa.
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Ms. Frugal Asian Finance says
April 6, 2017 at 1:17 pmMy husband and I are also interested in rental property, so this is really helpful. Thanks for sharing!
Justin says
May 13, 2017 at 12:43 amHi Kumiko,
I found your blog while searching something about investment on Google. You have an amazing blog. Great tips. I have bookmarked it.
Laurel Santos says
June 1, 2017 at 7:14 pmGreat tips! I believe that property investments are one of best, aside from it appreciates over the course of time it never runs out of purpose. Thanks for sharing this!