Real estate is a very cool way to make money for those who know their onions. However, first-time investors tend to make mistakes when purchasing investment property because of the lack of experience and the problem of not knowing the best way to go about investing in real estate. Making money with real estate might seem like something straightforward, but there are some things you need to know before purchasing an investment property. While some investors think that all you need to do is invest in a decent and nice looking estate, there are other factors you need to consider when purchasing an investment property.
Quality is Essential When Purchasing Investment Property
The first thing you should always consider when buying a property to invest in is the condition of the property. While you might see a property that you like or one which seem rather pleasant to you, you should always consider the state of such property before purchasing it. If the property needs renovation, you will want to repair all significant issues that the property might have. So, get a professional to thoroughly inspect the house for you so you can know how much the cost of repair would be and how long the renovation would take.
If the fix is something you can afford without putting a dent in your wallet and if the improvement won’t take long before the property starts bringing in income, then it would be advisable to consider purchasing the property. However, if the case is the opposite, then you need to be realistic and find another property to invest in. After all, what’s the gain in investing in an estate that is going to waste time and resources?
The Property Taxes
Property taxes should always be part of the factors you consider when purchasing an investment property. Having to pay higher property taxes will bite in your profits and paying lower taxes helps you keep a higher amount of your income as profit. One thing you need to know is that properties in urban and more developed areas usually have higher tax rate than properties in rural places. So, when purchasing an investment property, always ensure that you contact your local tax assessor to determine the amount of tax you are likely to pay on a property before you invest in it. Even if you get a property in perfect conditions and the ideal location, it will always make a wrong investment decision if the property tax is too high.
The location of the property
Another critical factor you should consider when purchasing investment property is the neighborhood. Property location is crucial in determining the investment returns on the property. When investing in real estate, you should think carefully and ensure that the neighborhood is one where tenants are likely to want to live in. You need to consider security first. Is the neighborhood one where crime rates are on a high or the low? Is the neighborhood very decent and appealing to the eyes? Are there local schools available in the district?
Considering factors such as these helps you decide before you purchase the property. This is because people are more likely to rent an apartment in a neighborhood that is decent and nice-looking, and well-secured and safe. Also, if the property is being rented by parents, they might want to rent an apartment in a neighborhood where there are local schools near to them because of the kids.
Managing the Property
Purchasing investment property is not the end of your real estate troubles, there is also the issue of property management. Keeping a property manager can be stressful, so you also need to consider this factor when purchasing an investment property. You need to consider if your income from the investment will be enough for you to think about hiring a property management company or if you would instead manage the property yourself. Most of the property management companies around could charge you a nominal amount of the monthly rent or more. They could also charge for supervising maintenance repairs from hired vendors. So, calculate your income estimate and determine if hiring a management company would be best for you and the property.
Taking care of unforeseen expenses
Although the primary aim of purchasing investment property is to make money, you must always be prepared for unexpected costs to show up. So, always keep an extra amount of cash stowed away for this purpose. There might be complaints of a plumbing disaster, a leaking roof or a spoilt water heater. It is always best to keep extra cash available somewhere solely for this purpose. If the property seems like one that is likely to give issues like these in future, you should calculate the amount it would take for a significant renovation to take place and be prepared to invest it in the property.
The Insurance coverage costs
Like Property taxes, Insurance coverage can put a dent in your income and leave you a minimal profit to bite on. Before investing in a property, you must determine the kind of insurance coverage you want for the property. Do you want coverage with a small premium? Do you want the insurance coverage to take care of your tenants’ personal property? Answering these questions helps you decide the kind of insurance coverage to purchase. You also need to consider if the neighborhood where you are purchasing an investment property has a high insurance premium due to its vulnerability to natural disasters. This and other factors help you determine if the investment is worth it or not.
Once you have carefully considered and weighed all of the factors above, then you can proceed with purchasing your investment property. Endeavor to consider these factors, so that you will not be stuck with abysmal investment returns. So, what’s the purpose of purchasing investment property if not to make a profit? A real estate investment can be profitable only if you do your findings before buying any investment property.
Do you want to buy investment property in Dubai? Déjà Vu Properties has a proven track record in real estate transactions. Why not partner with professionals who have the knowledge of the housing market in the UAE?
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