What You Should Know Before Buying an Investment Property
Property investment is among the world’s most lucrative investments, therefore there are many reasons why you should consider investing. However, unlike most other investments that may cost around 5 dollars a share, property capital investment may require you to spend six figures on a single investment. It is vital to arm yourself with enough information before considering where and how to invest in such businesses.
Today’s housing market is characterized by few homes in high demand, which limits potential buyers as the prices increase every day. According to National Association of Realtors, the persistent shortage of housing has resulted in a fewer number of contracts per year. The tighter housing inventory can slow the real estate market, especially as demand increases.
Properties’ shortages is not only a problem for those who are looking for homes to buy but also for investors looking to invest in property. Homes that require a little upgrading or repairs but are located in hot places are the best for investment. But investors have recognized this idea, and competition is still high.
Whether you are considering investing in a multi-unit complex for immediate rental or buying a home with an idea of selling in future with a higher price, here are some of the important considerations that you need to make before investing in the property:
- Understand the market dynamics of that area: Consider other features available in the immediate vicinity and speak with the locals and real estate agents who can let you know if some parts of that area are considered more superior that others. Make sure that you consult trustworthy professionals that will assist you to learn the housing market dynamics of that area. You can also access independent information from an independent data source that gives information on the average rent, property values, demographics and suburb reports.
- Avoid Buying a Fixer-Upper: Where demand is high, it is tempting to acquire a house where you can get a bargain and later flip it into a rental. However, if it is your first time investing in property, that could be a bad idea. In such a case, you may need to hire a contractor who does quality work at a more affordable price and who has enough skills in large-scale home improvement. The contractor will help you to estimate the cost of renovation and the approximate cost of the house before renovation. If you find out that the cost of the house plus the cost of renovation is higher that the market price, consider buying a home that is priced below the market price and requires minor repairs.
- Make sure that all the facilities of the property are in good condition: Check and make sure that parts of the property are in good condition. Make sure that the walls do not need any repair and the toilets are functioning well and do not need unclogging. Although you can call someone to help you fix the parts, they are costly and will definitely eat your profit. Some property owners may opt to do their own repairs in order to save money.
- Consider the worth of the property: The selling price of the property does not show the value of the property. You can hire a property valuation service to assess the property, and then you may use that to settle on a price. This person, referred to as a certified valuer, will help to evaluate the value of the property before you can buy or sell it. They will also assist investors who can negotiate for a better price, lessen liability and this may help in saving money.
- Consider the economic and other activities of that area: Check on the economic activities and other activities going on in the area that may impact the value of the property. Certain activities could impact the value of the property positively or negatively. You can do research to learn about that. Check the retail style and assess if possible gentrifying happened or is about to. Check the demographics, crime rate and working drivers in the area.
- Calculate the possible margin: Most firms that invest in properties aims between 5% to 7% margin because they have to pay staff and meet other expenses. As an individual, you should aim at a margin of 10% within five to seven years with an estimated maintenance cost of about 1% of the property annually. You should also consider other expenses such as insurance, pest control and landscaping.
Contact Plex Developments to learn more about buying your infill home!
14308 97A Avenue
Edmonton, AB T5N 0E9
(587) 745 – 1322