Many people make mistakes when they rush with buying a property that they believe will pay off greatly without considering the important factors. Every investment property will have its own advantages and disadvantages but the trick is to be aware of the current market’s needs. When you start being on the lookout for the right property, here’s what you have to account for:
1. The location makes half of the decision
The location truly matters, maybe the most – it will determine both the vacancy rate and the amount of the rent you can ask for.
If your goal is to rent the property, then you need to look for a real estate that’s close to attractive and important amenities, including schools, shopping centers, and public transportation, as well as parks and hospitals. Safety of the neighborhood is another factor that comes with the choice of location. The safest way to get correct information on this is to contact local law enforcement on the crime rate in the area. Identify is the rate is decreasing or increasing – tenants with families, especially with children, will see this factor as one of the most important ones.
2. Choose between the old and new construction
Some countries offer concessions or grants if you buy a new real estate as a first-time owner, so you could end up earning some money as well. It’s also easier to adjust a new real estate to modern trends and tenants’ aspirations.
On the other hand, if you buy a new estate from a property marketing company, it could cost you more. Namely, a property marketing company usually adds commissions to the overall price so you will have to determine how much the property’s value will be after the purchase and the works are done.
3. Identify the profit and the expected expenses
You need to be clear on what your profit will eventually be when you take the expenses into account. There are three things to consider here.
Firstly, the location and the quality of the estate will determine the rate of renting it and you should know what to expect here.
Next, you need to determine your fixed and variable expenses on an annual basis. Property taxes, maintenance, and insurance fall under the “fixed expenses” category, while variable expenses include unexpected expenses like broken utility systems or electrical appliances. This is the hardest part of expenses to identify because, for example, taxes are difficult to understand in countries like Australia. Many potential real estate buyers get correct information through WRC Quantity Surveying and other similar professional services to get a clearer picture of the expected costs and the overall value of the estate.
Lastly, you need to be prepared for the possibility of not finding a tenant in a short period of time. This means the expected profit will be reduced.
4. Low-cost maintenance
If your goal is to purchase a real estate for student or vacation rental, then you should know that the cost of regular maintenance will be higher due to the fact that tenants change more often. Furthermore, if the property is in poor shape or located in a low-quality area, be ready to spend extra money on maintenance, too. Aim for low-maintenance properties – they will not only be cheaper for you but they will also be more appealing to long-term tenants.
5. Selling potential
If you ever decide to sell the property, you need to know what its worth will be. Most of the real estate rise in value over time, especially if the city is planning to add new amenities to the neighborhood. This is something you can find out really fast and see what potential lies there.
Don’t rush the process. Have all the factors in mind and do the math. Only then will you make sure your decision is the right one.