10 Steps To Take When Buying Investment Property: Part 2 Find And Buy Your Property
Armed with a clear plan and the dream investment team you are already set to make more informed and financially viable decisions. Unfortunately, this does not negate the need for you to do your homework. There are multiple factors that combined can make or break an investment property. As a potential investor, you will want to be as informed as possible. After all, knowledge is the key to successful real estate investment.
Step 6: Set a firm budget
Whatever you do, do not borrow to your absolute limit. By being at the maximum loan that you can service, you are very vulnerable to changes in the interest rates and may find yourself unable to pay the loans if rates and other services and costs go up ( which they inevitably will).
Step 7: Know your cashflow
It is essential to understand what your cash flow, as well as budget, will be once you have secured the property. This will allow you to ensure that it can cover the ongoing cost of maintaining the property even if a tenant has yet to be secured. It is not as simple as ‘will rent cover the mortgage’, you must do your due diligence.
Step 8: Keep emotions out of it
You may love the cottage with the picket fence, but if the fundamentals are not right, you need to walk away. Repeat: walk away! By having a team of professionals at the end of a call, you should be able to avoid this situation, but when emotions take over, often common sense is ignored.
Step 9: Understand the rental and sales market and how they interact
Be cautious about whose advice you believe. It's always a good time to sell, and always a good time to buy depending on who you ask. Do not leave this information to chance, even if you have put together a great team. The market is changing constantly. Understand what the tenancy vacancy rates are. Educate yourself on how the economy affects house prices and clearance rates.
Remember property investment should be approached like any investment. What are the risks? What are the rewards? Whilst property is still regarded as one of the safest long-term investments, it is still an investment - and it's your job to minimise this risk and maximise the returns. Once you have done your due diligence, all that is left is to make that offer!
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