By Joanne Davidson.*
Investing your money into real estate could be exciting, but if you’re new to the game, proceed with caution. If you get things right, you could hit the jackpot, but if you don’t think things through, you could face a lot of losses. Properties usually cost around six digits. Before you invest that kind of amount, assess the property considering the things listed below.
(1) Are you up to the challenge of managing and investing into real estate?
You could always choose to manage the property on your own, or you could turn to a property management company. Either way, there will always be problems that could arise. If you manage on your own, this means that you will have to take care of maintaining, renovating, and securing your property among many other things. Do you have the time to show potential clients around? Can you handle doing the repairs on your own? Do you have the time and patience to handle annoying tenants?
If you do choose to ask professional management companies to do the work for you, you should look for a reputable company that will not cheat on you. Choose a company that responds in a timely manner to complaints of tenants and immediately attends to necessary repairs. Choose a company that does not handle too many clients, otherwise they will be spreading themselves thin and won’t properly pay attention to your property. Choose companies that are easy to communicate with and that will keep you updated regarding your property.
(2) Be sure you have enough funds without incurring additional debt.
While a real estate investment could be profitable, it could also be costly. Repairs, renovations and insurance cost big bucks, so be sure that you are financially capable of handling those things without falling into a lot of debt. You also need to prepare for a bigger down payment too, so make sure that you have enough money to spend initially on your property. If you do decide to take a loan, make sure that you subscribe to reasonable interest rates.
(3) Check the property carefully.
You need to go through the property that you are potentially going to buy with a fine-toothed comb. Ask if there have been any issues in the past, if there are any repairs that need to be made, or if there are portions that need to be altered. If you find a property that is sold very cheaply, it must be too good to be true. You might be in for a surprise, and you could be required to do a lot of repairs that could test your patience and your pockets.
(4) Is it in a good location?
The location of your property will usually determine several things: (1) types of renters with specific business interests, (2) its proximity to necessary social services such as hospitals, schools and places of work, and (3) the cost of renting it out. For example, if the property is close to schools, your tenants would most likely be students. Are you okay with renting your place out for just a specific duration (usually just during the school year), or would you rather find tenants who can commit to renting your space for longer periods of time. Remember, finding new tenants every once in a while can be too much of a hassle.
(5) Is it accessible?
What are the transport options available to the tenants of your property? How many minutes is it away from the heart of the city? Is it accessible through public transport? Is it within walking distance to other important locations in the city? Do you need to take private vehicles? Is there available parking space?
(6) Is it in a safe neighbourhood?
Safety is always a main concern as it is one of the things that is required. If crime is rampant in the neighbourhood, securing the property could be a headache for you and for your tenants.
(7) How much is the average rental in the area?
You have to know how much the average going rate is surrounding your property so that you can offer competitive and fair rental fees. If you factor in all the advantages and disadvantages of the property, can you rent it out at a fairly high fee? If you initially spend a lot at prepping the property that results in raising your rental fee higher than surrounding properties, it could be a risky move that could turn off potential tenants.
(8) What are the future developments around the area?
Does the immediate neighbourhood offer much potential in terms of development? If yes, then the demand for your property could be high, and you can raise rental fees in the future.
(9) How are the property taxes in the area?
Are property taxes in the area reasonable or are they too steep? If you are in a wonderful neighbourhood with beautiful roads and proper services, higher property taxes may be well worth it.
(10) Is the area prone to natural disasters?
Will your property suffer if the area gets hit with a typhoon or a snowstorm? Is your property located near any fault lines making it vulnerable to earthquakes? Additional insurance for your property’s protection against natural disasters could take a big chunk out of your income.
Go through this list every time you consider investing in real estate. Investing is taking risks, but make sure that these are calculated risks that will work in your favour.
*Joanne Davidson is a journalist who has covered issues in various sectors – advertising, online marketing, technology, healthcare, family matters, and more. Currently she is a writer for London-based property guardian company Lowe Guardians. Property guardianship is a scheme where people are granted low-rent accommodation in a vacant property in exchange for keeping it under observation and in good condition.