Real estate purchase serves a dual purpose for everyone, one is the residential and other one is an investment. If you have purchased a home already and now are looking to invest in a second home, you will get both, rental income and capital appreciation. Rental income will happen if you rent out your property. Other then that, with time, its value will increase, thereby giving you capital gains. Buying property for investment is an excellent idea due to certain reasons like,
– It allows you to invest your extra income, to build an asset, rather than pay taxes on it, or splurge it.
– Property prices always rise over a period of 10-20 year horizons, since land is a limited resource, while the population is growing.
– Real Estate, in general, is not affected by inflation.
If you are looking to invest in real estate and buy a home, few things you should remember are,
Build a Good Credit Report
Efficient financial management will help you build a good credit report and that will ensure that you get cheaper loans to invest. At any point, you may not want to pay all the cost of your new purchase by yourself, so you need to get a cheaper loan.
Choose a Property With a Great Location
In real estate, location precedes everything, so you should pick up a residential property, very close to supermarkets, stores etc. Try to find a place in a residential condominium. This is important, as it will take care of security concerns and renting it out will be easier.
Price Your Property Well
Since, this property is for your investment, future cash flow and present outgo should be carefully calculated. Find out the cost of this property, add on all money required for repairs etc. Then you can find out the kind of rentals, will such a property get, and analyze if it is a sensible investment. If you have not done thorough costing, your investment yield will go down.
Exiting The Property
Prepare an exit strategy, so you know at what level you will exit your investment. If you plan what is the profit margin you want, you will be able to exit in time. Look at the possibility of renting or leasing your property post-purchase to maximize gains, and then when you feel its capital value has reached a level you wanted, sell it off.
Like any other investment, real estate also needs to be carefully monitored. If you are investing in real estate, which is far from your current residence, utilize services of an agency, which will look after your property, help you lease it out or rent it to people.
Real Estate is going through a tough phase now, but it is following a cyclic pattern and in near future, it will turn for good. In fact, with depressed prices, there are many good deals available now. If you have some money to invest, this is an excellent time to buy property and sell later for profit.