Real estate is a comparatively straightforward investment plan to, say, stock broking and starting a business from scratch. The property markets are also much easier to understand for beginners, and this is why many young investors start out by investing in real estate before diversifying into other areas as their investment portfolio grows.
More often than not, and with the right business strategies, the value of your real estate appreciate and investors are assured of a return on their investment. That said, you still need to take your time in assessing and getting the correct valuation of a property before you spend your money on it.
Here are a few tips you need to know before investing in the property market.
Like in other investments, you need capital to invest in real estate. Most property developers require you to make a down payment of at least 25% of the cost of the property and repay the rest over a flexible repayment period. You can finance this through your savings if you have built a sizeable fortune to take care of the cost of the property you want to purchase. If not, a bank loan is your next viable option. A bank loan specifically for buying a house is known as a mortgage. See Everbank Mortgage Rates for an idea of where to start.
Some developers even have partnerships with local banks to help you easily access financing.
Whether you are financing your property acquisition through your savings or a mortgage, you still need to have some level of cash flow to cover your rent, bills and other financial obligations. In fact, before you tie yourself down to a mortgage or any other financial commitments, do an in-depth analysis of your finances to make sure the investment is worth it. You need to make sure you have means of financing the mortgage repayment as you wait for tenants and your other obligations to be taken care of.
Study the market
Do your own research on the property markets before investing your money in real estate. Look at the cost of similar properties in the neighborhood, scour the internet for information and attend open houses and site visits organized by various developers.
It is also important to look at several properties before making a decision. Have options and look at what every single one of the offers without bias or emotion. Never buy a house simply because you like it, unless, of course, you will be living there. There are other considerations to bear in mind as well.
Before completing the transaction, ask yourself whether you are getting value for your money? If you are uncertain about a property’s true value, then you should consider hiring an expert to make a valuation to help you out with the assessment.
It’s only after this has happened, and after your property has met expectations, that you should then make the down payment.
The goal here is to rent out the property immediately after acquiring it. Depending on the location, you may get tenants immediately; sometimes this takes up to six months. Use the rent collected from the tenants for your mortgage repayments and save the surplus for another investment plan.