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5 Steps To Successful Property Investment
hen looking to invest in follow a tip from a friend on a
property it's always potential investment. Many people
important to take a also don't do research because
structured approach to ensure you they don't know where to find the
get only what you are looking required information and so they
for. Over the years I've may make a blind investment,
developed the following structure hoping on good returns. Even
and I'll always stick to it so worse, they may put off making
that I know I have done all the the decision (to invest or not to
homework necessary to make a invest) and stay stuck in
sound investment and reduce any procrastination while the asset
potential risk to a level I'm starts to show strong growth.
comfortable with.
So what needs to be researched
Step 1 - Research Research before investing in property?
Research
Location - such things as
This is possibly the most the population, main industry,
important aspect of any main employers, future investment
investment decision. When I talk in infrastructure, tourism, local
about 'researching' a potential universities.
investment, what I mean is to do
all the necessary homework to Property prices - average,
find out if the investment is median, recent sales, potential
right for you and if it will rental returns, previous and
provide the return you're looking predicted growth.
for.
Tax and ownership laws -
Sometimes it is tempting to country and state laws,
overlook research and maybe occupier/investor tax rates.
appreciation or depreciation into
There may be more areas you need account.
to research depending on your
situation but the main objective Before investing in property it's
here is to carry out the research important to do the numbers to
to a level you are comfortable know
with. You can never do too much
research. What you can afford to
purchase
Thorough research will give you
peace of mind to make confident Purchase and ongoing upkeep
investment decisions. costs
Whatever you are trying to Potential rental returns
achieve, someone has already done
it before and the information is Monthly cash surplus or
out there. It may be in books, deficit
newspapers, special reports,
published on the Internet or Once you know all of these
available from real estate figures you can then decide how
agents. You can find the much you can afford to spend
information you need to make a within your budget, what rental
confident investment decision. return you're looking for and
whether you will gain a monthly
Step 2 - Know your Numbers cash surplus or if you will need
to contribute towards its monthly
upkeep.
Note: This step primarily deals
with rental returns and does not So what are the common numbers to
take a property's annual know and calculate?
yourself from any surprise costs.
The Purchase Price It's wise to be conservative with
your calculations and maybe add
Purchasing Costs - items in a contingency amount.
such as Stamp Duty, legal fees,
real estate agents' commission, Please remember, there may be
legal fees. more costs you need to factor
into your calculations according
Rental Income - If the to your situation
property is rented to tenants,
how much rent can you charge? Step 3 - Create your
Criteria
Ongoing Costs - Management
Fees, mortgage repayments, Before you go shopping for your
repairs and maintenance, letting investment property it's
fees, Municipal or Council rates. important to know exactly what
you're looking for so that you
buy a place that suits your
Net Return - this is the requirements. The best way to do
end result once you have this is to create a list of
accounted for all of the income certain criteria that a potential
and expenditure and it will show property must meet.
if you will have a cash surplus
or deficit. You may choose to be stringent on
some of the criteria such as a
The more properties you calculate set limit for the purchase price
returns on, the better idea you but then you may be a little more
will have of what is available in flexible on other criteria like
the market to suit your accepting $10 less than the
requirements. You'll also protect expected weekly rent.
and Management
So what would you include in your
criteria? Here are a few Like any investment, we always
suggestions: look to minimise the risk of loss
or damage and it's no different
Town population no lower than when it comes to property. There
10,000 are a number of ways to do this
including taking out a suitable
Expected rent at least 7% of insurance policy and finding the
the purchase price right property manager.
Brick house on land, no more Whether you buy a property to
than 10 years old live in or rent, it is
potentially at risk for various
Initial repairs to cost no reasons and so you can insure the
more than $1,000. property against these risks.
Insurance policies can cover you
Whatever criteria you choose is for loss in the case of
up to you but it gives you structural damage, theft,
control over what you buy and flooding and many other
will certainly decrease the time instances.
you spend looking for a property.
From carrying out your research Landlord insurance policies are
and working out the numbers you also available for extra cover of
should find it easy to create instances such as malicious
your criteria. Now you can go and damage, legal fees, loss of rent
buy the property that's right for etc. So shop around for the
you. policy that's right for you.
Step 4 - Property Insurance If you are buying a holiday home
or a rental property you might neighbourhood watch, security
consider employing the services alarms, window locks and smoke
of a Property Manager. The role alarms.
of a Property Manager is wide and
varied and a good one can save Step 5 - Tracking your
you a lot of time and money. Investment
They can find new tenants, Once you've invested your hard
arrange to have your property earned cash you'll want to know
cleaned, collect rent, keep an how it's performing and what sort
eye on your property, pay your of return you're getting. Again,
bills out of incoming rent and we're only going to look at
much, much more. Finding the rental returns rather than growth
right Property Manager will pay as the growth is only
off rather than choosing someone speculative.
who won't look after your
property the way you want them Every month you should keep all
to. receipts of income and
expenditure concerning the
It's important to shop around to property. This includes:
seek out the best Property
Manager and you can do this by Statements from the Property
asking the right questions. A Manager
good Property Manager will
communicate regularly with you Bank mortgage statements
and be available to address any
concerns you might have. Receipts for repairs
Additional measures to secure Payment receipts for
your investment include the local Municipality or Council rates
advise you on what extra records
to keep ensuring you get the best
Any correspondence regarding annual deductions.
the property
And that's the final step to
All we are doing here is tracking Successful Property Investment.
the income and expenditure so we All it takes is one step at a
can see what the return is. By time to become familiar with the
tracking the figures regularly process and although there are
you can see how your investment many other ways and processes
is performing and this advocated by many other investors
information can then be filed the end result is ultimately to
with your annual tax accounts. leave you empowered to make the
correct investment choices.
Your accountant will be able to
About the Author:
Tim Wright is an international property investor and regular article contributor. He is the author of "Bulgarian Property - The Overseas Buyers' Kit available at http://www.bulgarianpropertybuyer.co.uk
Source: www.isnare.com
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