There are so many reasons why you need to invest in property due to the fact that it’s one of the most reliable ways of generating wealth. It can give you a passive income for life, diversify your investments (making you feel more secure), you can use market cycles to your advantage and even help improve your cash flow. However, there’s no guarantee that your investment will be a successful one. For this, you need to make the right calls at the right time. Here are a couple of tips to help make this somewhat easier.
The first reason why people invest in property is to get some rental returns. For residential property, if you can find a place that returns 1 or 2 percent of its total value on a monthly basis, you’ve done well. With commercial property, the numbers go at around 4 to 5 percent per year. Keep in mind, though, that the rental returns change in time but this doesn’t have to be a bad thing. Also, bear in mind that vacancy puts you in a spot where you’re losing money instead of making it.
One of the ways in which you can create wealth through property investment is in a scenario where you can recognize property that will grow in value in the future. Now, achieving this is possible in several ways. First of all, you can make an additional investment in order to improve the property in question. This is the so-called fix and flip method, which is quite straightforward but requires a fair amount of strategy. You see, not every improvement to the property gives a positive ROI on the resale, which is why you need to do your research beforehand.
Another method is market growth and it can also happen due to a number of reasons. First of all, if the neighborhood starts developing over time and the demand increases, the property will be worth a fair amount more than when you’ve bought it. This can be discovered by reading the city council development plan in the nearest future. On the other hand, there are some global trends affecting the real estate market, which are something that may elude you but also something that a real estate industry veteran may learn how to anticipate.
Doing your research
One of the most important things for success in the property investment market is the in-depth knowledge of the field. However, in order to start learning, you need to find credible resources. Anyone can write anything online and, as a newcomer to the industry, you won’t have a way of telling the difference between a life-saving tip and false information. This is why you need to A) find specialized learning materials, B) start following most credible industry-related journals and C) attend property seminars. Platforms like Think Money are a place where you can access some of these seminars.
Tax benefits are yet another popular reason why people and investment funds alike buy real estate. Tax depreciation is just one of them. Let’s say that you intend to sell the place that was briefly listed as your permanent place of residence. Well, in a scenario where you lived there for two out of the last five years (at least on paper), you would be eligible for the capital gains tax benefit. These are just two simple examples that apply for residential properties while owning a commercial property brings some benefits of its own to the table.
Make contact with professionals
Your contacts are also key in determining the successfulness of your investments. First of all, you need to have the right buyer’s agent on your side. This is a person with years of first-hand experience in the industry, as well as someone whose advice will be invaluable for any investment that you decide to make in the future. Knowing a professional contractor, as well as an accountant, is also quite important. Networking is the key to success, regardless of the industry.
The very last thing you need to keep in mind is the fact that concepts such as luck and randomness usually come from those who don’t have all the facts in front of them. This is why the success of your investment depends on your ability to do your research and consult professional help. The more you know, the greater your odds. As for the unforeseen, this is merely your inability to know every single factor that goes into the equation. First, get familiar with your options and only then you can safely spring into action.