Are you getting ready to buy an investment property? Property investment is a great financial move if you're ready for it. However, there are many risks associated with purchasing property. Use these tips to keep yourself protected when you're about to make a large financial investment.
Do evaluate your income
Do you think paying your mortgage and utility bills is hard now? Imagine adding an entire second mortgage to the monthly mix! Investing in real estate has the potential to be lucrative, but property investment is a huge financial undertaking. Be sure you can afford to take on such a big responsibility before you sign on the dotted line.
The best way to ensure you're ready to invest in real estate is by determining if your income is stable. Only once you are certain you will be able to make your mortgage repayments should you look at investing in property.
Don't believe the list price
Are you under the assumption that the mortgage is the only fee you'll have to pay when you invest in real estate? Perhaps you believe the rent you will receive from your tenants should cover all of your costs? The reality is, the mortgage is just one payment you will be required to make when you own a property. As with any property, there are ongoing maintenance fees associated with running the dwelling.
Utility bills can be steep. You have the option to ask your tenant to pay for these expenses, but you'll have to keep rent reasonable in order for them to do so. Maintenance fees are considerable when you purchase an older building, and you may need to spruce the place up a bit before anyone moves in.
Do adopt a long-term mindset
Property investment isn't like other types of investments such as shares or businesses. You're not going to take a chance on something that will give you a small yield in the present, and you're not able to get out of a property investment easily.
Think of buying a property as a long-term investment in your future financial stability. You may need to own the property for a minimum of five years before you can even break even on the sale thanks to all the fees and interest paid. This may be a scary thought, but the good news is that real estate investment can pay off big if you're willing to stick with it for the long term.
Do protect yourself
Are you planning on renting the property out to tenants? Insurance is a must in this situation. Imagine that your tenants accidentally leave the stove on overnight. A devastating fire could leave you with nothing to show for your investment, so take the time to purchase an insurance policy that will cover you in case the worst happens.
Don't fall for cheap prices
Cheap real estate seems like a great opportunistic buy, but you typically get what you pay for. The area could be riddled with crime, or a property that looks fine on the outside could be stripped bare on the inside. The property may have hidden liabilities such as pest problems or water damage. Low price tags mean high risks that are unlikely to pay off. It's just not worth it so be careful.
Contact Mortgage Choice today for personalised assistance for your own unique property investment situation.
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