More people are deciding to invest their money in property all the time. It’s a form of investment that rewards hard work and offers the chance to make huge profits. It also requires startup cash though, so it’s not for everyone. But if you’re sure that this is the path for you, here is a comprehensive guide that will help you to get started.
Plan a Strategy
The first thing to is plan out a strategy for your investment. You need to think about what kind of investor you want to be. If you don’t want to get your hands dirty, it is possible to invest in a real estate investment scheme. These allow you to get a return on your money, but someone else actually manages the investment on your behalf.
This is not something that many investors choose to do though. Most real estate investors tend to do a large part of the work themselves. That means finding their own properties to invest in, making key decisions and everything else that comes with being an investor. If this is what you plan to do, read on to find out what the next step should be.
Set a Budget
It’s always important to have a strict budget in mind before you start to look for a home to start your investment with. It’s easy to get carried away with the whole process and take your eye off your finances. But, remember, this is not for fun, it’s an investment. And that means that keeping your finances in order is key.
The budget needs to take your financial situation into account and make sure that it’s sustainable for you. Investing too much money will only backfire on you in the long-term, so don’t be tempted to do this. The budget should be planned out carefully and very strict. It’s the only way to make sure that things don’t fall apart.
Scout a Location
The location you opt to buy a property in will have a big impact on all the things you do later. The location will affect the price of the property when you buy it and when you sell it. So, if you can find a cheap property in a desirable location, you might be able to make some changes and make a big profit.
It’s also a good idea to think about which locations are going to rise in value in the future. Up and coming areas are the kinds of areas that are becoming more trendy and desirable for young professionals to live in. Investing in an up and coming area before the property prices start to rocket can be very profitable.
Buy at Auction
Auctions are great places for picking up bargains. There are property auctions that take place every week in locations all over the country. So, attend them and see what is on offer. You can buy homes at much lower prices than you’d be able to if you bought a home from an estate agent.
There are a few rules that you should keep in mind when it comes to buying at auction though. First of all, never buy a property without viewing it first and finding out all the details. It is tempting to get caught up in the moment and bid blindly. But this is never a good route to take. You should also get a feel for the auction process before bidding.
Consider the Condition of the Property
The condition of the property you buy is very important. It will dictate how quickly you are able to sell the property. If the property is in relatively good condition, and there are not many changes that need to be made, you will be able to sell it quickly. But in these kinds of cases, the profit margins tend to be slimmer.
It’s much easier to buy a house cheaply if it’s not in great condition. This lowers the price and then enables you to make changes yourself. If you keep the budget low on those changes, you can increase the size of your profit margin when it comes to selling the home. It’s something that you should think very carefully about before buying.
Make Changes to it Once it’s Yours
Once you have the keys in your hands and the property is yours, it’s time to start thinking about making changes. For some investors, this will mean nothing more than simply updating the fixtures and giving the home a new lick of paint. These kinds of changes don’t take very long to implement.
The changes might have to be a little more radical if the home is in poor condition though. If the home has not been lived in for a while, the first thing to do is check for infestations. If people haven’t been living there, the chances are something else has. If you find a problem, explore the pest control options and get it fixed. Then you can make the changes to the decor and furniture.
Decide Whether to Let or Sell
There are two options open to investors: letting the property or selling it. Selling the home at a profit provides you with instant returns on your cash. It means you can make some money and move on quickly. But if you decide to let out the property, you will have a long-term task on your hands. It will mean catering to the tenants needs and watching the money drip in slowly.
There are, of course, benefits and drawbacks attached to both options. It’s best to look at your own case and evaluate the pros and cons of each option. Some people choose to rent out the property for a while until the prices in the housing market improve. This helps to maximise potential profits for the seller.
Keep the End Tenant or Owner in Mind
When you are making changes to the home, you need to make sure that you are always keeping the future tenant or owner in mind. They are the ones who will be making the final judgement on the home, so what they think is most important of all. You don’t want to create a home that you like and then try to sell it to someone of a completely different demographic.
If you’re looking to rent out the home to students, you will need to think about the location in relation to the university and transport links. And if you are looking to sell to a young family, you’ll have to make sure that the home offers enough space and outdoor facilities for them. All these things are important if you want to make a success of your investment.
Landlords Need Insurance
If you do decide to become a landlord and rent out the property to someone, you will need insurance. Landlord insurance is not the same as ordinary home and contents insurance, and it’s important to remember that. If you have the wrong kind of insurance and then try to make a claim, you will not get the money you want.
So, make sure that the insurance policy you get is specified as being for landlords and nor ordinary homeowners. This will guarantee that you remain protected should anything go wrong with the home. Check the small print too. Not all policies cover you in the event of damage caused by the tenant, but it’s best to have that kind of cover.
Price the Home
It doesn’t matter whether you are looking to sell or rent out the home; you still need to think about a price. If you are looking to find a tenant, you will need to get the rent price just right. You can get a basic idea of how much you should charge by looking at the local rental market. Then taken into consideration the kind of tenant you want to attract and the location too.
You should apply the same approach to setting the price if you are selling the home. You could ask an estate agent to value the property for you and see what they say. This valuation will give you a guide to what an estate agent thinks you could get for the property. It’s usually best to get a few different valuations and then get an average from them all.
Build a Portfolio
Once the property has a tenant or you’ve sold it, you can move on to the next project. This is the best part of this kind of investment. Once you have completed one project, you can use the money you made to undertake another one. This process moves much quicker if you sell the properties rather than rent them out.
But some investors do like to build a rental property portfolio. The more properties that you are renting out, the more money you will have flowing into your bank account every month. This helps to secure your financial future and frees up more and more money that can be put towards new investments.