As the global economy is recovering from the recent downturn caused due to pandemic, the real estate markets are offering more and better opportunities for investors. The real estate market is currently regaining ground and turning profitable once more. As a novice investor, your top priority should be developing the right property investment strategy to yield the highest possible returns. Before deciding which plan is right for you, you must consider three factors: purpose, time and risks. It would help if you were clear about why you are investing in residential Property. What do you hope to accomplish by starting to invest in real estate? How do your investment strategies fit with your immediate objectives? Also, what is your risk tolerance? Do you have a high tolerance for risk or a low tolerance?
Buy and hold- The best property investment strategy
The most common property investment strategy is to invest in a property, hold onto it for a medium to an extended period, rent it to trustworthy tenants, and claim the interest and maintenance costs against your taxable income. When the Property’s equity reaches a certain level, you may sell it to pay off some other real estate debts or decide to pay it down until the rental revenue exceeds the interest and expenses. Another choice would be to leverage the asset tremendously by using the equity in the Property to pay for other real estate purchases. The factors that would make this successful would be the fundamentals that should be addressed when purchasing in the first place.
Things you need to consider when making a property investment
Location
You depend on strong equity growth, so if you make a mistake, here could find yourself breaking close to even. Property values should double every ten years on average, but the cautionary word here is average, so proceed with caution. Some people value things far less, and others much more than this. If you have done your research and due diligence on the area, the equity growth will be present; however, if you have made your acquisition in the incorrect location, the story can be completely different.
Tenants
The Property must fit the neighbourhood’s demographics. Appropriate tenants could be hard to find if you invested in a studio apartment in an area with no students. Gaps of weeks or months between tenants are terrible for cash flow, so look into the area’s demographics and the types of properties in demand. A wise investment is a qualified property manager who can screen and oversee tenants.
New or old Property
If you purchased an older, established property, you might discover that your maintenance expenditures rise steadily throughout your ownership. In contrast, if you bought a new brick-and-tile family home, you would have minimal problems. However, if the Property is an old colonial with weatherboard construction, you must consider periodic painting and carpentry repair.
Renovation
Instead of a money pit that requires a total rebuild, you should look for a property that is essentially sound but needs some TLC. Have a professional inspect the Property so you can be sure what will be done to make the modifications and so you don’t get caught off guard with things like needing to restump the structure or replace the roof. If the restoration is substantial, you will need to closely monitor expenditures because these projects tend to get away from you, eating up any profit you thought you might make.
Keeping the above-mentioned things in mind, you will be available to develop the right property investment strategy for yourself. Lastly, make sure from the start that you must determine whether the Property is a wise investment and account for variables such as fluctuating interest rates, maintenance costs, fees, other costs, vacant rental units, and so on. It is essential to give economics enough thought when making such a huge investment.
