You’ll save yourself lots of time and effort if you adhere to the 3 tips for investing in real estate. Property investment has a lot of potential benefits, and it can help you build up a substantial wealth, in time of course. However, property investing has some risks, and no one can guarantee that everything will go ok and that the money will build up.
Less risky than shares, property investment attracts many people and has two major benefits : the tax advantages from negative gearing and the capital growth.
What is Negative Gearing
Negative gearing in property investment means buying with money that came from a loan that has the annual ‘rent’ less than the loan interest and the expenses paid for the property’s maintenance together.
Doing this brings benefits from taxes and the most important thing is the interest of your mortgage.
What is Capital Growth?
Capital growth represents the money made from the value of your properties. This is not guaranteed, because you have no guarantees that the value of a property will raise.
If you plan on starting to do some property investing you don’t have to start by investing in a place where you also live in. You can for example buy an apartment that you can then rent out. Furthermore, property investment that’s done in a place which you are not going to occupy takes some of the stress and emotion of what and where to buy.
Tip #1: Decide Where to Buy
One of the first things you must consider after you’ve decided do perform a property investment is where to buy. It is recommended that you try to buy in a growing area that provides everything a tenant is looking for: shops, transportation and leisure. Make sure the property has a walking score that is 70 or above. Here is a chart explaining more on walk scores:
Daily errands do not require a car
Most errands can be accomplished on foot
Some errands can be accomplished on foot
Most errands require a car
Almost all errands require a car
Tip #2: Considering Purchasing Apartments
This is one of the most important tips for investing in real estate. Consider choosing an apartment instead of a house to buy. They are easier to maintain and a great part of the expenses are shared with the others.
A risk in property investment is that the value of the property you bought may decrease, and you may be forced to sell the property quickly, so consider this when buying and try to pick an area where you know you can always sell the property with no efforts.
Tip #3 Know the History of the Property
And the last tip for investing in real estate is that before doing the property investment you can ask a little about the history of tenancy in the area, if there are many tenants, if there are periods when the apartments aren’t occupied.
After doing the property investment in a property that will be rented, you can pay your ‘rent’ for the loan from the bank, if you got one, and when the ‘rent’ is finished you will no longer be negatively geared, but positively geared. This way you’ve made your property investment pay for itself. Not being negatively geared anymore makes you lose the tax advantages, but you should still be able to make profit.
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Hire a Property Manager
If you want to get into property investment but you feel that you don’t have the time to manage and take care of everything, you can hire a property manager that will take care of the property management for you.
The fee for such a thing is somewhere around 5% of the profits, but it has many advantages, you save a lot of time and you will benefit from the experience and knowledge property managers have in this domain. These people deal with rentals and tenants daily so they know a lot about this.
Another thing you need to do is trying to keep up with all the changes that occur in property investment and property investing taxation laws.
This rounds out the the 3 tips for investing in real estate that you should know about , if you want to start investing into property properly.