Property investment involves the purchase, ownership, management, rent, and or sale of real estate for profit. While this definition makes it look so simple, there are certain rules that you should follow.
Buy property from motivated sellers.
Motivated sellers are people who really need to sell off their properties, probably because they have a problem, this makes them more flexible on the price and terms of sale. They place little priority on getting a tremendous amount of money, but it’s about the speed of certainty of the transaction occurring. Most people set up properties to make profits from it but as time goes on they become motivated because they’ve got a deadline to meet or they are moving to a new location.
Don’t buy to sell. (At least not yet)
Property investment builds capital that provides a constant and reliable income. Never purchase a property intending to sell it. This is because of two reasons. The value of money depreciates while the value of the property appreciates. You could sell your property today and the exchange rate increases, that’s a loss of profit. Selling a property can be costly too, it will saddle you with paying tax gains and agent’s commission.
Buy properties in an area of strong rental demand. If there’s no one to rent property to, then there’s no point buying. You can check the Internet for the rate of rental demand in a particular area, check the new happenings there, it could be at a higher rate in employment, an extension or situation of new universities, New supermarkets, new hospitals, etc any reason that could cause increased population in the area.
You can force an appreciation of value on properties by manufacturing capital growth through renovations. Indulging in the right cosmetic renovations instead of structural renovations can produce more profit than doubles the cost of renovation in a quick time.
Buy a property that gives positive cash flow.
When you take all other costs away; mortgage, insurance, management fees, household fees, security fees, etc, have some profit left for you. If there’s no profit left, it’s a liability, not an asset.
Invest for the long term.
If it’s a place of limited accommodation and an increasing population, this means property prices will go up over the long term, enjoying a monthly cash flow. You could pass it down from generation to generation; if the properties are well structured.
These rules are steps to minimize risks and maximizing returns with property investment.