Real estate has long been a popular way of investing money, and in 2017, around 15 percent of Americans had investments in property (in addition to their primary residence). Real estate is a popular choice of investment for many reasons, but aside from the potential for a healthy return on your investment, the tangible nature of property is a big part of its appeal. Investing your money in something that you can physically see, and use is a great feeling. Whatever your reasons for investing in real estate, there are several things to consider when planning to splash the cash on a property, here are some of the things that you will need to think about:
What is Your Budget?
Buying an investment property is infinitely different from purchasing a property as your next family home. Both property searches are exciting, but you should be focused on entirely different priorities for these two utterly different property searches.
When searching for a home that you will live in 365 days of the year, there are going to be many things that you need to think about when deciding on the perfect home for you. From the number of bedrooms, the house has, through to the closest good schools for your kids to attend; your end decision will be based on a lot of practical considerations regarding your lifestyle and how you like to live and spend your time. These practical considerations when choosing a new home will also be joined by emotional decision making; you will be wondering whether you can imagine yourself living in the house, you will be looking for the feeling of butterflies in your tummy when you walk through the door and realize that it’s the perfect home for you. When you find the right home to live in, you may decide to go over budget as the benefits that the property offers you, outweigh the additional financial cost.
In complete contrast to choosing a family home, selecting a property to invest your money in is a decision that is ruled by your head and not your heart. Your real estate investment aims to make you money, so the opportunities available to maximize your profits should always be your primary focus. Think about not only how much you are prepared to pay to buy the property in the first place, but also what your budget will be for any work that may need to be done to house in terms of money spent on remedial work, renovation, or redecoration.
At Home or Away – Where Will the Property be Located?
Whether you are planning to purchase a Penang property, or a condo in California, location is a hugely important consideration. Think about whether you want a property close by so that you can keep an eye on your investment, or if you would rather it was further away so that your investment can be managed from a distance.
Location is also incredibly important when considering budget, the amount of cash needed to get you a studio apartment in the city may be the same as you would need to get a sprawling estate in the country elsewhere. So, when considering where you will be purchasing your investment property, it is a good idea to have in mind the kind of property that you intend to purchase, and the location where your budget will match the type of property that you are looking for.
How Will You Use the Property?
Of course, your primary purpose for investing in real estate is to make yourself a profit, but you will also need to think about how the property that you purchase will be used. Are you intending to buy a home either in a different state or abroad which can be used as a holiday home for yourself, and maybe rented out to others too? Or, are you planning to purchase a property that you can rent out all year-round to secure a long term tenant so that you have a consistent, regular income stream from your property?
Thinking about the primary use of your property, along with who you intend to use it, will be an essential consideration when planning your investment purchase.
Do you fancy becoming a landlord?
Being a landlord is a role that some people love, and some people find more hassle than they feel it is worth. This is why some property investors deal directly with their tenants, while others prefer to involve a third party and employ a property management company to take care of the rental arrangements of their real estate.
To decide whether you want to manage your rental directly, or involve a company to do it on your behalf, you will need to consider a few things. Firstly, can you afford to employ a third party? Are your profit margins big enough to pay a third party? Secondly, do you have the time to handle calls from your tenants and to sort out their issues yourself? Another point to consider is logistics; are you close enough to your real estate to make it possible for you to handle things like rental inspections, and interviewing tenants?
How Will You Maintain It?
Following on from being a landlord, questions over how you will keep your second home maintained are also important. Again, this is a consideration which requires careful thought over cost and the time that you have spare to handle it. If your property is far away and used as a holiday let, who will be in charge of ensuring the property is maintained throughout the year so that it doesn’t fall into disrepair? Who will take responsibility for cleaning up the rental between bookings to ensure that it is ready for when the next guests arrive?
As you can see, investing in property is both an attractive and potentially rewarding, but there are a number of factors to consider when deciding if it is the right choice for you.