Buying an investment property is a solid financial move that can boost your finances to new heights. The real estate market is a safe bet that can return enormous profits if properly handled. However, entering into the business can be very costly and this is why you should look for ways to save money during the investment. Here are some solid ideas that can get you started.
1. Think Long Term
Ask any experienced property investor and they’ll tell you that long-term is the only way to look at your investments. Making hasty decisions that result in small profits won’t beef up your portfolio nor your bank account. Instead, you have to be patient and wait for an opportunity to present itself, even if that opportunity takes a while to turn a profit.
Take, for example, properties in developing locations. If a neighborhood is only being built, chances are that properties aren’t very sought after yet. If there’s nothing to attract residents, then why would they be? Of course, there will be plenty of reasons to buy a brand-new property once the location is finished, but many don’t think that far ahead when investing. This could be the perfect opportunity to enter into a market with cheap properties and easy profits. All you have to do is wait.
2. Aim for a Fixer-Upper
Buying a brand-new property is a pretty safe bet. You make minor changes and opt to sell it once the price rises ever so slightly. However, the initial investment for near-perfect properties is very high, which makes them not very lucrative, especially when you don’t have large sums of money at your disposal.
On the other hand, fixer-upper has a lot more potential to give you some serious profits. You don’t even need much of an investment for the initial purchase. Once you’ve acquired your fixer-upper property, you need to get to work turning it into a shining example of real estate.
With a solid investment into labor and improvements on the home, you can end up with results that far surpass your expectations. A lot of property investors are often worried about the combined costs of buying and fixing a home like this, but the numbers don’t lie – it’s drastically cheaper than getting yourself a brand-new property.
3. Choose the Right Kind of Property
All the money you invest in a property doesn’t mean a thing if you don’t choose the right kind. After all, not every opportunity that presents itself will end up being profitable. There are a lot of factors to consider before deciding to purchase a property. Ask yourself: what constitutes a prime piece of real estate?
Location is arguably the most important factor. If the property is located close to the center of a city, you are pretty much guaranteed to get offers left and right. Even when located peripherally, a piece of real estate that is large and attractive will get people knocking on your door and calling your phone within minutes. How do you prioritize and decide what kind of property to buy first?
You start with your budget. If the place is within your range, while also having some of these favorable attributes, you should consider purchasing it. Finding the best deal might mean sacrificing a bit on the side of quality, but that’s something you can make up for with renovation.
4. Save on Taxes
When you purchase a new property, you have to deal with the taxes that are involved with such a large purchase. You might have to pay capital gains taxes for any property that you don’t plan on living in. On the other hand, you can also benefit from tax deductions on things like maintenance and negative gearing.
In countries like Australia, taxes can take a large chunk out of your investment properties if they aren’t assessed well. With the help of proper quantity surveying in Australia, your tax depreciation report could end up favoring you and leading to lower costs when purchasing a property.
5. Choose Good Financing Options
There’s a lot of money to be saved by carefully examining financing options. When you talk to your bank, you need to discuss these options and take in multiple quotes and opinions. A good option for property investors would be to re-mortgage any already present mortgages and look for new properties that offer good terms with financing.
No matter what kind of deal you encounter, always make it your priority to protect your credit and financial stability. Don’t spend too much cash on an investment. Credit is considered a very good idea, so long as the terms are fair. Make a point to thoroughly research all of the options that are available to you and don’t take up the first offer that a bank agent or lender gives you.
Related: How to Save Money: Negotiating and Reducing Real Estate Closing Costs
When you enter the real estate market, you need to be prepared to spend a lot of money. However, you can significantly reduce the costs that you can expect by putting in a bit more effort into searching for properties and getting some good deals. Keep some of these tips for property investors in mind and you’ll get a lot more bang for your buck in the market.
This article has been contributed by Stella Ryne.