Have you ever thought about buying a home for a potential investment later? When you buy a home, all that matters are your own opinions, preferences and needs. You may find your dream home instantly; it could take months or years. Prospects may be rejected based on your personal and often emotional assessments. Difference when it comes to investing in property? None of these matter when you are buying an investment property! What does become important is the analytical assessment of whether the investment will bear rewards.
Now, here is a comprehensive list of reasons why investing is different to buy a home.
• You need to find an investment property that suits your budget. It should have the potential to generate generous returns soon. If you want to hold onto the property for many years, then the returns can be reaped in the distant future. Then again, you need to be able to capitalise the property by some way of monetising. You may rent it out, use it as a vacation rental or you may have other plans. The bottom line is that the purchase price must keep the resale value in mind – any potential returns are fundamental to the decision. You cannot think of affordability alone.
• What price is the right price? This question is one of the most difficult to answer. You will find investments properties in the same area with similar properties to be quite differently priced. Unless you understand why the difference exists, you will fail to see reason. Always be sure to keep an expert at hand to guide you in the right direction.
• Do not choose any random property or any location. You may fall in love with some type of properties and a location. That doesn’t imply your property and the location will be desirable for those you intend to sell it to. The banks too may not like the loan to value ratio you would be asking for given the location and the type of property. As mentioned earlier, you need to focus on what the world thinks, how markets are poised and what your potential buyers would do, not what you personally feel about the deal.
• Invest in markets you are familiar with. Look for suburbs poised for growth or growing right now. Consider the rental prospects and how much you can earn, given that is how you would monetise the investment property. Look for investment properties that are attractive, have wide appeal and require little maintenance.