When it comes to property investment, it's easy to become excited and jump right in. However, this can often lead to poor investments that lose money rather than providing you with a source of steady income. As such, consider the three steps below to give you a head start on the property market:
Spend Time Doing Research
Before making any investment, it's important that you carry out thorough research. However, with property development it is absolutely critical that you fully understand the market and where your property plans fit in.
The most important thing to understand is the amount of risk involved. Many budding investors make the mistake of assuming that property is a sure-fire way to make a substantial profit. However, while this may have been true in previous years, the current economic climate means that you aren't guaranteed a huge return on your capital.
Property development remains to be a great way to add assets to your portfolio; however, you are essentially tying up tens of thousands of dollars to a house and hoping that your profit outweighs any tax and interest paid. As such, knowledge is key before you commit to tying up substantial amounts of money in a property.
If you know someone who currently has an active portfolio, find out about their experiences and any challenges they have faced. This will give you the first-hand knowledge that will help you to avoid the potential pitfalls of the property market.
Consider How Much Effort the Property Requires
Before committing to a property, it's important to consider how hands-on you want to be in renovating and managing the property. Many investors see property as a way to purchase assets and sell them at a higher price down the line. While this is possible, many developers find the true value in property lies in renovating unloved homes and turning them into something great.
As such, you have to make a concrete decision on how active you wish to be in the property's development. This doesn't stop once the home is fit for the market; rather, you have a number of options to consider when it comes to managing the property also.
Your first major decision is whether you wish to act as a private landlord or have an agent rent the property on your behalf. Evidently, registering as a private landlord means you don't have to pay any agent fees. However, this can also be a risky option as you don't have the safety net of a letting agent to fall back on should anything go wrong. Scheduling maintenance and repairs is left entirely to you, which has the potential to become a major headache as your portfolio grows. If you want to look into the benefits of hiring a real estate agent, then read more here.
Decide on Your Target Tenant
With property development, you have to imagine what the home will be like in the mind of your target tenant. Students will require a completely different living space than a young family, so make sure you renovate your property with a specific demographic in mind.
Once you've decided on your target demographic, consider how much free reign they will have in the property. Many landlords don't like the idea of smokers or pets living in the house; however, giving your tenant some leeway might mean they will take out a longer agreement.
Long-term tenancy agreements are the cornerstone of a growing property portfolio. Empty homes equate to lost income for landlords, so it's important to have a tenancy in your property all throughout the year. As such, being a great landlord really pays dividends and giving your tenant a little breathing space may encourage them to take up longer agreements.Share