June 9, 2016

Preparation and Investigation before Property Investment

Real estate and property investment can be a great way to make an investment strategy matter. Before you decide to purchase your first condo, house, apartment or other property you are planning to rent out you will need to be aware of the world of investment you are entering. The following examples will give you more information you can use to get yourself started on the path:

· The income may be inconsistent

When you are working on purchasing investment property you are literally placing a lot of your finances into a single project, much like what your investment portfolio would look like if you place all your stock into a single company. Although owning an investment property can be a lucrative task, it still leaves you pretty vulnerable to risks of all kinds. If you buy a huge investment property you will be able to earn for about a 1% of its total value as is the case most often. The thing is however that you still need time to find tenants, so you will need to consider that as you move forward, as well as the chance that some tenants may stop paying rent at some point and it may require eviction. That will take time, so you will need to have money in reserve to push through. If this situation happens you will not only fail to receive any cash flow, but you will still end up stuck paying property taxes, mortgage, maintenance and insurance.

· Do you really want to handle maintenance and tenants?

The first mistake often made by people when they buy a rental property is to underestimate the amount of work that goes into dealing with tenants. Finding good tenants can be pretty challenging, but the real problems may arrive after they have moved in. A good example of that can be when the tenants are late on rent, so this puts you in a situation where you will need to decide what to do. If they are making too much noise, if they let other people live there or they violate parts of the rental agreement, then steps will need to be taken. You should not forget about repairs and maintenance as well, so be prepared to handle a number of issues as time goes by. Hiring a property manager could lift some of the weight off your shoulders in terms of governing your property.

· Account for all costs

Considering how much it usually costs to hire a property manager, you would also be surprised at how much it also costs to own a rental property as well. When it comes down to figuring out the cash flow of your property, you would do well to take certain things into account such as insurance, maintenance and property management if you want to avoid spending too much overall. The costs will vary by condition of your property as well as location, so you would do well to take all of this into account as you move on with your plans.

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