If you want to earn good profit in property investment then you should know the path to follow. First of all pull out a chair, sit down and write down what you want to achieve from your investment. When things are too good to be true they are so don’t rush.
Don´t: Forget to sit down and write down your real estate goals
Before you visit a property, sit down in a quiet place with pen and paper and think carefully about what you wish to achieve from the real estate market.
You should have a clear idea of your budget, how long you want your money tied up for and what type of risk you are most comfortable with.
Don´t: Rush into a deal that might be too good to be true
If you find a property that looks like an amazing investment, take a very deep breath and figure out what you are not seeing. Probably one time in twenty, it will be a great deal and you just happened to get there first.
More often than not, others will have seen it before you and will have passed on it for a reason. The best deals are usually the boring reliable ones, not the perfect shiny ones.
Now there is the excitement that comes with owning property but you should also note that you are a landlord. You will need to put in plenty of work and time. You should also ensure that the figures are up to date.
Don’t forget you’ll be a landlord
Each of these has its own bundle of advantages and pitfalls, and some people just don’t like the idea of being a landlord. Managing a property, and tenants, requires some time and energy, and it helps if you can do minor repairs yourself. If you were to buy a two-family house in an improving neighborhood, for example, live in one unit and rent the other, you could find your own cost of shelter (home expenses combined with rental income and depreciation on the rental unit) approaching free or exceeding it within a few years.
Don’t neglect to run the numbers
Smartphone apps and online mortgage calculators can help you with this. They all allow you to enter cost, down payment, taxes, insurance, and, of course, the interest rate, to arrive at your expected monthly payment. You can plug those into a worksheet like the one below to figure out whether a particular property makes sense for you.
Be smart; do not be attached to your property. It is a separate business entity. When you buy something ensure that it is not old or else you will drain your finances in maintenance and repair.
You must not become personally and emotionally invested in your property purchases as it must be implemented from a commercial perspective.
Do not buy an older property that can drain your finances through maintenance costs. New buildings can come with a builders’ warranty and older properties tend to have less attractive tax depreciation benefits.
Do not buy in an area where there is an oversupply of properties. Rents will be low and capital growth will be limited. Without capital growth you may not have enough future equity to use as security to purchase additional properties.
Do not manage the property yourself. To adopt a professional approach to your property investment strategy it is highly recommended that you engage a professional, reliable property management company. First time investors who experience a bad tenant will be tempted to sell their property rather than continue with their property investment wealth building strategy.