Are you thinking of entering the world of property investing? Well, here are a few things you should know before diving in.
Property investing is a fun rewarding venture if done properly. Fail to do it right however and it can quickly become a daunting, stressful venture that’s less rewarding. That said, a question many investors have is how best to approach real estate investment. This is more-so true for new investors. So how can you venture into property investing the right way? Well, their several things you can do as an investor to boost your chances of success. While the list is endless, there is one huge factor and that is knowledge.
You need to start by gaining valuable knowledge about property investing. Why you ask? Well, knowledge of property investing is very crucial. In fact, investors who have been able to stay profitable for a long period of time have the right knowledge about property investment. This knowledge allows them to confidently make wise investment decisions.
It is with this that we’ve decided to share with you this post. Below, you’ll find valuable knowledge about property investing. Take this knowledge to heart and you are likely to enjoy venturing into property investing. That said, we’ll be looking at the following areas in property investing;
- Profiting From Property Investing
- Leverage Pitfalls
- Vacancy Risk
Profiting From Property Investing
Before taking up a property investing venture, get to know how much you can profit from it. There are several ways you can go about doing this. Profitable investors, for instance, tend to weigh in the estimated profit of an investment well in advance. This helps them know how they will profit from their investment and by how much. To do this, they factor in several things before making an investment. One such thing is cash flow.
Cash flow is very important when determining how much investor profits from property investing. With cash flow, you’ll find investors weighing in the amount of money needed to fix or repair a given unit and how much it can sell for. Other investors weigh in annual income against a property’s inherent decreasing value. This helps determine the amount of tax they owe ultimately helping them know profit levels.
Understanding leverage pitfalls is crucial for any investor thinking of property investing. But what are leverage pitfalls? Well, it’s the act of investors borrowing money to make a certain property investment. This borrowed money is typically known as a mortgage. Mortgages allow investors to get their hand on new assets or properties. This they are able to do whether they have little or no cash. In addition, it increases the number of properties an investor can purchase.
While this is a common practice in property investing, some investors opt to stay away from them. This is especially true if they don’t understand the risks involved with the mortgage. Investors who avoid mortgages tend to have other strategies up their sleeve. One such strategy is buying properties with little or no down payment. While this might look like an appealing prospect it has several pitfalls. As a result, it is advised that you stay away as much as possible.
Understanding types of mortgages are crucial before taking up any property investing venture. In addition, you need to understand the benefits and risks associated with them. Furthermore, you need to know what qualifies you to apply for a loan. Before taking up a mortgage, you’ll need to have 20% of a property’s sale price.
When it comes to mortgages, it’s advised you look at different types before settling on one. What this does is ensure you go for a mortgage with desirable interest rates. While mortgages are not bad, there are some you should avoid as much as possible. That said the mortgages you should avoid include balloon investment, zero down and adjustable rate mortgages. This is more-so true if you are a new investor.
Patience is very important for any investor thinking of venturing in property investing. Many first time investors make a mistake of expecting profits immediately. While some might be lucky to enjoy this, it’s not that common. This is especially true if you’ve invested in a rental property. Why is this? Well, with a rental property, your initial rental income will go to your mortgages. Furthermore, it’ll go to taxes, expenses as well as repair and upkeep. After some time, once you’ve settled your mortgage, you’ll start reaping the profits.
Vacancy risk is another thing you need to factor in when planning on property investing. Whether you are planning on selling or renting out your asset, you’ll go through a phase without finding a buyer or renter. With this in mind, it is always advised to have savings set aside. This’ll help pay for a mortgage during a vacancy. In addition, the money can be used to help deal with matters upkeep of the property.
Some investors, despite factoring vacancy in their property investing planning still experience challenges. These challenges come as a result of investors getting the vacancy estimation period wrong. That said, it’s always advised to factor in several months of the vacancy on a yearly basis when setting aside savings for your property investment.
If you have additional questions on matters property investing contact Duplex Invest. They’ll share with you valuable information sure to set you off on the right foot.