Real estate investment is the most lucrative way to create wealth, grow capital, and plan for your retirement. Despite this, in the property market, some investors make losses while others make so much gain.
Like other types of investments, property investment requires adequate planning, research, and dedication else the amount invested exceeds the income you make. Below are the top financial tips from Upkeep Media that will help you make the best from your property investments.
1. Have a plan
As with every successful business, you should have a well-detailed business plan for your property investment. Your business plan should include how you intend to finance it, the cash flow analysis, and how you intend to manage it.
While planning the finances, you should decide if you intend to make an outright purchase, use a loan, or use your personal finance. You should note how much you want to invest and also have a backup fund in case of unexpected costs.
Also, plan for other expenses like taxes, utilities, upgrades, yearly upkeep, and essential maintenance.
2. Research your prospects
Research is very essential when it comes to property investment. This is because investing in the wrong property can make you incur a lot of losses. Your primary goal as a property investor should be capital appreciation and rental income. This means that the property you are investing in should be able to appreciate with time while you are getting your income.
Not all neighborhoods can guarantee this, but if you do the proper market research, you will know locations where you can get the best value at an affordable price, possibly an upcoming neighborhood.
Your property should be one that tries to solve a problem in the chosen location. For instance, if an area needs many family rentals, office space, or stores, owning a rental property in that location will be lucrative.
Your research should also include the trends of properties in the area. This will help you to know the type of property that tenants will love. Investing in the right property will guarantee you capital appreciation and rental income.
In addition, familiarize yourself with the current demand/supply, legal matters, market trends, and tax obligations. This will help you to avoid the obstacles that may arise.
3. Inspect the property before buying
When you have found a location and also decided on the type of property you want to buy, it is essential for you to inspect it thoroughly. This is because most of the sale properties are staged to make them attractive and hide some flaws.
A thorough inspection will reveal the actual condition of the property. During an inspection, you will notice the current damages and signs of damages that will occur in the future. Damages that have to do with foundation or roofing may be costly to repair.
During your inspection, also look out for signs of molds, pest infestations, and plumbing leakages. If there are damages to be repaired after your inspection, you should add it to the investment cost and decide if it’s worth purchasing the property.
4. Protect your Investment
When you finally purchase a rental property, you need to protect it by investing in landlord insurance. This insurance will cover liability protection (in case of injuries to tenants or visitors due to maintenance issues), property damage, and rental income loss.
Additional coverage in the landlord insurance may include flood insurance, guaranteed income insurance, emergency coverage, or other construction expenses.
The landlord insurance will protect you from incurring certain losses, but it does not cover personal properties belonging to the tenants.
5. Hire a property manager
Real estate investment is lucrative, but being a landlord is stressful. It can also be time and money consuming. With property managers, you will be able to enjoy your investments, escape the stress, and also save time and money.
Property managers charge about 10% of the monthly rental income, but the value they offer exceeds this amount. Property managers will help you in the following aspects:
- Reduce the vacancy periods of your property, and it wouldn’t be vacant for long
- Conduct a proper screening of tenants to ensure you have high-quality tenants who will rent your property for the long term, pay rent on time, and be less troublesome
- Avoid legal problems that can be a financial headache
- Effective rent collection
- Proper handling of evictions
- Low maintenance and repair cost
Real estate investment is very lucrative. However, it can also be a nightmare if things are not done correctly. To gain as a property investor, you must have a good plan, do adequate research, and show commitment. RPM Iowa can help you by cutting out the daily responsibilities of property management, saving you both time and money.