Finding the Right Investment Property - Here is How!
Investing in property has been around for decades. Putting your money in the property market is safe yet rewarding when done right. Investing in property is exciting and doesn't even require a constant effort. Instead, all you have to do is consider certain factors when investing and let the market work for itself while you relax and enjoy the equity later. Though you have owned a house before, you need to remember that investing in property is a very different journey from buying your first home.
Even then, you don't want to buy just anything when investing. Finding the perfect property is the key to maximizing your return. The right investment property is a balance of location, facilities present in the local area, accessibility of these facilities, price, and more. Here is how you can begin:
Have Clear Goals
The first thing when it comes to investing in property is to have a definitive goal. As a first-time investor, jumping into buying any property on hand and making things up along the way can be both risky and unhealthy. With a little early research and pre-planning towards your goal, you can avoid many possible hurdles and, in time, retrieve maximum return on your investment.
It is essential to understand what you want for return with this investment. Few questions you can ask yourself to define your goals are:
- Do you want the investment to be long-term so that you can use it during your retirement years?
- Are you looking to buy a home that you can renovate and sell for profit?
- Do you want to negatively gear your investment with the estimation of better return in the future?
- Or do you want the gain of positively gearing the investment property to use as your extra income and invest further?
Finding answers to these questions will clear out the path you can take when investing. This will give you a clear goal and define your steps forward. You can also determine the type of property you want to invest in, its location, and the price you are willing to settle on. Likewise, your clear goals will help your lenders and brokers to give you practical advice on your investment strategy.
After you have a definitive goal and your path is determined, it is necessary to understand how a cash flow works. Most first-timers do not know how cash flow works and make the wrong investment without understanding the money coming in and going out. This can often lead to a costly mistake.
In simple words, cash flow is the total money coming into your account and going out of it. If you have a large amount of cash flow, it is called positive gearing. If your cash flow is not enough, it results in negative gearing.
When investing in property, positive gearing is the most profitable way to go and probably the easiest to understand. Positive gearing occurs when you borrow the money for your investment property, and the return from the property covers both your interest and expenses. With positive gearing, you generate a capital gain while providing ongoing income. At the same time, you will also pay a higher tax. However, you will still end up with a higher net income.
Negative cash flow occurs when your investment property generates a loss. Even with the loss, negative gearing can work under two circumstances.
- The value of your investment property is expected to rise over time.
- Your negative gearing can lower your tax payment.
When negative gearing, evaluate all aspects and crunch your numbers. Understand the total cash flow in and out of your account before buying. This will help you to know what to expect instead of leaving you wondering the reason behind your lower cash flow.
Location is the Key
Location is always the key when it comes to the property market. While investing, the location of the property determines whether the property you are investing in will generate a capital gain or not. Research the location and facilities in and around the local area. Access to transportation, shopping centers, schools, parks, and local business is always a plus point. Areas with growing rental demands, upcoming infrastructure developments, and local businesses yield higher capital gain. As an investor, you'll need to select areas that are developing with potential trends expanding to generate capital growth. Once you've short-listed a few locations, research further the history behind the population growth and the possibility of growth and development. Look for property in the area with the highest potential. You can also contact our specialist for a report and some early advice. We will help you with seamless investment research!
Know your Ideal Tenant
When investing, knowing your ideal tenant will keep you steps ahead. Understanding what your tenants are looking for in a place, they would live will help you develop your property and invest in them accordingly. Asking targeted questions will get you closer to what your tenants want. Who are your ideal tenants, and what do they look like? How is their typical lifestyle, and how does your property fit into their needs? Finding answers to these questions will help you develop a property that your tenants want to jump at the opportunity to rent. Depending on your goals, you can find ways to keep them happy in turn; they extend their stay. Consider the priorities depending on your tenants and location then you'll have the right investment property.
Still confused? Give us a call and we’ll help you through your investment journey.