7 QUESTIONS TO ASK BEFORE BUYING AN INVESTMENT PROPERTY
Deepak Mehta
Grow Your Wealth & Pay Less in Taxes | I Help Professionals Turn Property Investments into Long-Term Financial Success
Investing in property can be complicated, especially if it is your first one. Fortunately, there are several questions you can consider to make the right start and set yourself up as a savvy investor.
These questions will help provide more insights into your investment property purchase and is also likely to keep your investment journey safe and profitable over the long term, whether you’re buying your first investment property or your 10th.
1. DO YOU HAVE A PLAN?
The best way to approach real estate investing is to have a strategy. You should have a good understanding of what your financial goals are, your timeline, and how you’re going to achieve them. Whether you’re a first-time investor looking for property investment for capital growth or a seasoned investor looking for an extra income stream, having a feasible and well-structured plan will enable you to select the right investment properties, holding onto them, and keep moving forward.
2. DO YOU UNDERSTAND HOW THE REAL ESTATE MARKET WORKS?
You don’t need to become an expert to have a successful property portfolio, but it’s advisable to have a clear picture of how this market works and how you can benefit from it. Learning the basics of wealth creation will enable you to make smart investment decisions. Basic concepts such as equity, real estate market cycles, the difference between good and bad debt, active and passive income, the power of leverage, and cash flow are important to understand before committing to an investment.
3. HOW MUCH CAN YOU AFFORD?
How much you can afford can be very different from how much savings you have in your bank account. Though savings play an important part in contributing towards the initial deposit for the property, you need to equally factor in the ongoing operating expenses once the property is settled. In fact, we have helped several clients to build a portfolio without having six-figure savings.
Clarity about your borrowing capacity, monthly expenses, emergency costs, and how much you are willing to commit will help you set realistic goals. It is not uncommon to find investors who are not aware of how much tax they pay or what their mortgage rates are. However, if you’re serious about investing, you need to get serious about your finances.
4. WHAT TYPE OF PROPERTY ARE YOU LOOKING FOR?
Part of an investment strategy is determining what type of property you are looking for. Each type of property can serve different goals. Should you buy a house, a townhouse, or an apartment? The answer will depend on your investment goals, borrowing capacity, cash flow estimation, and how much cash and/or equity you have available for a deposit.
5. ARE THERE ONGOING COSTS INVOLVED?
Cash flow is the king when it comes to investments. Before buying an investment property, it is essential to factor in ongoing monthly costs. Take time out to research local property taxes, home insurance rates, and anything else that could increase your expenses down the road. These factors can affect your cash flow—and if things don’t go as planned, it could pinch you financially. It’s always better to know these numbers upfront so you have no surprises along the journey.
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6. HOW WILL YOU MANAGE YOUR PROPERTIES?
Excellent Property Management is an essential aspect of a winning portfolio. Screening renters, setting the right contracts, handling maintenance promptly, and managing finances can take time and energy. Before you invest in a property, ask yourself how you plan to manage it. The last thing you want is extra stress from being an investor.
If you’re thinking of investing, consider outsourcing some of your responsibilities to a professional team so you don’t have to manage every aspect of investment on your own.
7. WOULD IT BE A GOOD INVESTMENT IN THE LONG TERM?
Property is a long-term game and the longer you hold onto a property, the higher are the chances for success and getting the benefits of compound growth. Do you know how to evaluate investment opportunities? Is this property priced right? Is it appealing from a renter's perspective? Having clarity regarding these aspects before making any sort of commitment can help you determine whether a property is worth investing in or not.
TEAM SONI CAN HELP
Buying a property is one of life’s biggest investments, so make sure you are making an informed decision. If you are not confident about one or some of these questions, there is a chance that you don’t fully understand property investment yet. In this case, we would love to help.
Our team of experts knows all the ins and outs of the real estate market and we are passionate about helping others start or accelerate their property journey. Our effective step-by-step system guides and empowers our clients to make investment decisions with confidence.
By implementing a tailored investment strategy, you will have a detailed roadmap to start and succeed in your property journey.
Do visit our website for a wealth of valuable information and more such interesting blogs.
To learn more about how we can help you become a successful property investor, book a no-obligation Wealth Consultation today.
Senior Coordinator - Digital Marketing
3yIt's pretty interesting, Deepak Mehta. Before working with Property Investments, I used to spend hours on Domain. I thought I was looking for a property but, in reality, was just dreaming of having one. These questions may bring some clarity on how to convert dreams into plans :)