When you begin to have an interest in property investment, it can be a very heavy decision where to place your hard earned money. Investing in property can be very tricky and risky if you make the wrong decisions. Therefore it is important to consider your options thoroughly and not make any hasty moves.
Here we have compiled some of the common guidelines for those who are wanting to invest in property with the intention to gain rental income.
1. Get sound advice
For beginners, the world of property investment is very strange and scary. For this reason it is of utmost importance to talk to experts and professional consultants in the field. People like property financiers, advocates or lawyers that deal in property, financial experts, depreciation consultants and accountants should be consulted to ascertain factors like whether your finances are suitable for property purchases.
Additionally, you need advice on the entire buying process, including the legal and financial or banking paperwork that needs to be fulfilled. You would also want to know the hidden costs attached to property purchases as it not only covers the cost of the home or commercial lot, but also things like stamp duty, legal fees, etc.
2. Choose the right location
Do some background research on the property you want to purchase. Usually properties will always appreciate in price, but you will stand a better chance of securing tenants if you buy a property that is near a University or College, public transport, shopping malls and community facilities (like parks, post offices, restaurants and shops).
3. Decide what type of tenants you want
You should decide early on what type of tenants you prefer. Usually student tenants are have a high turnover rate and sometimes have a reputation of not being good caretakers of your property. The same can be said of young working adults who share rented homes as a group. However, these two groups of tenants are easy to obtain.
However, if you are looking for stable, long term tenants, target young families with children or young married couples as they are more responsible in general and pay their rent on time. In the long run, responsible young families will save you a lot of maintenance costs as they take better care of your fixtures and home appliances.
4. Appoint a solicitor
This is extremely necessary to help you with the legal aspects of your property purchase, including dealing with the developer’s lawyers, obtaining a strata or council title, drawing up tenancy agreements, reading through the fine print and making sure you understand any purchase contracts you enter.
A lawyer is also there in case there are any complications that arise further down the line, either with the developer or tenants. Of course the costs of legal fees must be taken into account when budgeting for an investment.
5. Plan your finances wisely
Investing in property has many hidden costs. Money has to be spent not only during the purchasing phase, but also in the long term. When you first purchase a property, there will be stamping, legal, utilities connection and loan establishment fees, among other things.
However, even when you are renting out the property, you will have to pay maintenance fees and contribute to the sinking fund (if you buy an apartment or condominium) and pay various taxes if you own landed property. As the years go by, you will have to perform repairs, for example to the piping system or the roof or the toilet fixtures. Therefore the rental you charge should take into consideration all these monthly costs as well.
6. Join a group of property investors
There are many societies of property investors who meet regularly to discuss property trends and strategies to increase income. Some of them will occasionally organize training seminars that will keep you informed and better equipped in investor knowledge. If you plan to make property investments a long term income generator and wish to buy more than one property, support groups will really let you have the necessary networks and contacts.
These are some very basic tips for those who wish to start investing in property. Property investments are definitely one of the more stable and assured investment fields for those who have the means for it.