Property can be a good investment for those with experience and knowledge in the industry. However, more and more people are entering the property market in the hopes of getting extra income from rental units. This may seem like a sound investment, however it isn’t without it’s pitfalls. So, before jumping and buying your first property, we’ve brought together five points to consider when planning your investment strategy.
#1 Location, location, location – For potential tenants, location can be key to their decision-making. It should also be yours too. Finding the right location for you investment should be the priority. However, who you aim to target with your property will be a factor to choosing the right location. Small families, and young professionals would be looking in different areas to fit their lifestyle. A quiet area with a park nearby and easy access to the highways to escape the city might appeal to the family demographic. Whereas a central unit, in the middle of all the buzz, and good access to public transport would be appealing to the young single professional. Wherever you decide, consider the type of tenant you want to attract.
#2 Research and study – Buying a property on a whim, in the hopes of finding a tenant that feels the same way is very risky. With all the risks involved with property investment it’s not a good strategy to buy with the heart and not the brain. It is very important to carry out research on your potential property investment. If you are buying a unit in a brand new development, it is worth researching the developer. Take a look at the quality of their previous units, search online for reviews, look at possible delays, etc. Research on upcoming developments in infrastructure. Is there going to be a new BTS/MRT line coming through the area? This could help increase the property’s value.
#3 Personal financial analysis – It’s important to carry out a solid financial analysis of your personal accounts. You will need to be aware of all the costs involved with owning an investment property. Calculate what you can comfortably afford, don’t assume that you will always have a tenant renting your property. If purchasing a new development, that hasn’t been finished, you will need to calculate the costs during the construction period. Also plan for when things go wrong, like unexpected bills, damages, etc. Having some extra cash put aside would be beneficial to your peace of mind.
#4 Exit steategy – Some investors will hold onto their property indefinitely, but that may not be what you want. You will need to decide if or when you sell the property. You will need to consider whether to wait until you have reached your target ROI or another investor comes along an with an attractive offer for your unit. Either way, have a clear goal of what you want to achieve with your investment.
#5 Keep up-to-date – A good investor would keep an eye on the market at all times, watching and reacting to the ebbs and flows of the market trends. So as you carry out your research, keep stock of what is happening around you, keep up-to-date with news on developments that focus on your area and target audience.
Investing will always be risky. However, research, studying, and knowing your market will reduce the risk considerably. Always keep on top of your finances, you need to keep track of what is coming in and going out. Don’t forget, this will always be a learning process, so the more you prepare, the better your chances of succeeding. Good luck!