5 Top Tips When Buying an Investment Property
Ahmed Ali Riaz Malik – Investing in real estate is an effective way to rake in huge amounts of money. Purchasing an investment property is one of the most profitable real estate investments and has the potential to generate a great amount of wealth. However, purchasing an investment property can also lead to losses if not done correctly. In order to avoid such a situation, there are some important tips which must be remembered while buying an investment property. 5 such tips have been discussed here.
Select the right property
It is important to invest in a property that is likely to increase in value over a period of time. Thus, it is necessary to carry out proper research about the location of the property to determine how the area in terms of capital growth is so that you have a clear idea about the level of appreciation of the said property in the coming years. It is equally important to purchase the property at the right price. To this end, avoid real estate companies because they present inflated prices of properties. Instead, go for the independent valuation of the property by a lender. Never purchase a property without having complete knowledge of its market value. In the case of a residential property, it is beneficial to ensure a cash flow by renting out the property.
If you are purchasing your first investment property, it is better to opt for a low-cost property because expensive properties are costly to maintain. Even if you have loads of money to invest, starting with a low-cost property such as single-family homes is recommended. As you learn the ropes of the trade, there is a possibility of making a mistake. It is much safer to make mistakes when the amount of money involved is not much as compared to high-value investment.
Financing the property
Purchasing an investment property on the mortgage becomes necessary when you do not have enough cash to pay for its value upfront. Do research about the loan terms and interest rates of various banks and lenders before taking a long term loan. You can consider both fixed and variable interest rate loans. Variable rates are cheaper in the long run because interest rates rise with an increase in property prices, which, anyway, leads to capital gains for the investor. Overall, the type of mortgage you choose must suit your finances.
Be clear about return on investment.
When you invest in a property, you should know about the returns you will get on the investment. In the case of rental property, you must ensure that the returns increase over a period of time.
Conveyancer or Solicitor
Whether you need a conveyancer or solicitor depends upon your situation. A conveyancer is a cheaper option that saves money but may not be able to provide certain services in complex transactions. Solicitor, on the other hand, is better suited for complex transactions. In a nutshell, a conveyancer is suitable for simple transactions but cannot handle complexity.