PROPERTY INVESTMENT FACTS THE EXPERTS ALREADY KNOW
As long as you find the right investment, creating wealth through property should not be a problem.
However, finding the right property to the uninitiated might be easier said than done.
Investments involve a certain amount of risks since you are putting your money on the line. If you do not use the right strategies, you might end up with more losses than profits which is obviously detrimental to your portfolio. Therefore, you have to find the right strategies to use.
Here are property investment strategies and tips you should learn before you make any investment.
Prioritize your goals
Before you make any investment decisions, you need to know what you are about to get .into. In this case, every strategy you will learn will have its benefits and limitations. Some will bring in high income and attract high tax deductibles.
Others will demand so much attention in terms of management.
If you have a problem choosing the best option, then the best way to solve this is to consider what goals you have. The goals you desire to achieve will determine your budget, market factors, and the property you decide to buy.
Best financing option for your new property
The four conventional methods you can use to finance your new property include paying the new investment with cash, taking a loan, using your self-managed superannuation fund (SMSF), and using equity.
If you are a wise investor, you can find a way where all these four methods can work together. For instance, after you find a suitable property, a loan can be of great assistance if you do not have enough cash to purchase a property.
However, note that a loan brings in extra expenses. That is why so many experts are not for the idea of taking a loan for an investment.
Equity on a property can help you fund a new project or refinance a mortgage loan. By doing this, you reduce interest rates on a previous loan. You can also use this to evade a loan if you do not want to take additional risks.
Funding your new project using SMSF is a great idea. With the help of an accountant, you will be able to know what this fund can and cannot do.
Flipping vs. Renting
After you purchase a new property, what you need to solve next is finding out whether you should flip it or rent it. Both, like all other strategies, have benefits and limits.
Flipping is suitable for investors that want to make quick money. That means, after you do all the renovations, you can sell it at a profit and then look for another property. It may be a good idea, but for people who would prefer a long-term project, renting is the best way to go.
Renting will assure you some income by the end of the month. Besides, your property tends to increase in value with time as long as you renovate it properly. Ensure, though, that you pick a rent method that you can manage easily.
Negative gearing vs. positive gearing
As you pick the right strategy, you should ensure that you calculate all the expenses that will come. For instance, a new property will attract tax deductibles on your income.
Therefore, many investors consider negative gearing as a way of claiming a deduction on their taxable income. Even though this is a period of losses, be sure that your house could grow in value with time, and help you counteract these loses.
Positive gearing properties are not easy to find. Even though they attract high income than your expenses, these houses are not locatable easily unless you buy them in the open market. The other limitation of this type of gearing is that growth prospects are low.
Start small – Final remarks
The good thing about property investment is that you can start anywhere. Do not despise that small investment you have regardless of how uncomfortable it may be. There is always a possibility of growth if you are patient enough.
Once you have a reliable budget in place, reaching your goals should be easy. Remember, since investment is risky; ensure that you have a well-written vision so that you have reason to take all risks that come with this investment type.