What to consider when buying a property as an investment.
Investing in property should be thought of as a business venture. The results of property investment aren’t immediate but that doesn’t mean that investment should be viewed differently than a business. Property can’t be purchased and left to yield profit on its own. This approach can amount to neglect and lead to a languishing investment. Anything you do can affect the quality of your profits and results. To avoid negative changes, and enable positive ones, it’s best to apply a business mentality toward your investments. This involves creating a detailed business plan and keeping well-organised records. Further, allowing expense buffers, building a team of competent professionals, and establishing solid relationships with talented tradespeople are also important.
Continuing in this vein of thinking, just because you’ve chosen a good property doesn’t mean that you’ve guaranteed your money. You may well have built your wealth, but this doesn’t entail that you will maintain it. Maintaining your wealth is a different focus altogether. In order to accomplish this, you need to ensure that you have things like the right insurance, adequate buffers and a good exit-strategy to mitigate debts and taxation. Looking at property investment as a business venture will maximise the chance that all these things will be in place.
Getting a loan.
If you’ve decided to invest in property, you’ll probably require a loan for this goal to be realised. To secure property loans from a bank, your financial profile needs to be as attractive as possible when submitting an application. There are numerous ways you can achieve this. Personally, this might include having a strong employment history, good credit, a low income to debt ratio, or a strong savings account. However, picking the right property will also help in securing a loan. The value, size, and location coupled with market drivers all have an effect on your chances of being granted a loan.
Related to these considerations, while finding the best location for your property is important, it’s a good idea to balance this focus with finding property in a location of growth to enable better profits. If you’re concerned about your financial profile, then you should try reducing your ‘bad credit’. This includes credit card debt, personal loans or pre-existing mortgages. Showing a consistent pot of savings which you have accrued over time will also look attractive to potential lenders. And, lastly, if you already own properties, look at selling those that aren’t as profitable as you would like and use that money to funnel into other efforts.
Why invest in property?
Investing in property can help alleviate your financial dependence on work and the pressures that come with it. Sound investments allow you to pursue other goals and passions through financial stability. This might involve travel, nurturing a passion project or having the ability to ‘give back’ and take part in charity work. Lessened demands on your time and income affords you more autonomy, more enjoyment and potential early retirement.
While buying property as an investment might be viewed in a clinical and detached way, it’s important to remember that investment is deeply personal. It often frees up your time, energy and money to channel into other, more rewarding ventures. If work has dominated your personal or social life, or prevented you from spending time with your family, the answer might be investment in property. Through well-informed investments, you’re able to nurture other aspects of your life. Especially those that may have been neglected because you are financially dependent on work.
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