Property investment is good for your life plan. It can give you more value in long term. You can also use it if you need for make some event. Here 6 ways to start investing in property.
1. Make a List of Your Financial Options
Property is an expensive investment option and you need to have cash and access to finance. If you are buying a property for rent, plan to:
· Minimum 20% down payment. Nothing is free for property investors. For every purchase, plan a deposit of at least 20% of the purchase price.
· Initial costs for repairs and others. Usually the cheaper the property is compared to market value, the higher the repair price. You need to repair and beautify your property so that it can be rented at a favorable price.
· Licensing and inspection fees. Most properties that are rented out need to be inspected for safety and get a permit.
· Empty fee. Be prepared for an income vacuum before a new tenant arrives. Even if you don’t have any income, you will need to pay for your mortgage, taxes, insurance, and other expenses.
· Repair costs before renting back. Maybe just repaint and clean some parts. It may also be a major overhaul and the cost of disposing of items that previous tenants left behind.
· Maintenance costs. As property owners, we need to ensure building maintenance so that tenants feel safe. Well, you need to prepare a budget for maintaining or maybe repairing water or electricity lines so that your property is always ready for rent.
2. Start with a Passive Property Investment
If you don’t really understand real estate investing or buying and selling property, you can start with a passive strategy. The advantage is that you can invest through your device.
Invest in DIRE
Real Estate Investment Funds (DIREs) commonly known as property stocks. We can buy this product on the stock exchange and later the pool of funds from several individuals will be invested in properties such as malls, office buildings, and health facilities.
The difference is, we don’t get to choose where our money goes.
Investment in property mutual funds
This is the most popular way to diversify your portfolio without owning or understanding how to buy, sell and manage properties.
Both DIREs and property mutual funds are passive means of property investment. This would be the best option for people who are willing to invest but are not looking for a side job.
Property investment through crowdfunding
This option is also a passive type of investment. The difference with a DIRE or mutual fund is that you are more involved here.
This crowdfunding site provides a larger range of options. Initially this system was intended for people who have large capital. Now there are more affordable investment options.
The main advantage is that you can choose specifically which property to invest in.
Well, here you need to be accredited, usually the accreditation requirements are people who have an opinion of more than USD200 thousand and the main house value is more than USD1 million. The reason is that you need to know the quality of the property.
You need to analyze the available documents and do your own research regarding the property. And don’t forget to research the crowdfunding management and regulations.
Real estate crowdfunding is a passive way of investing. You can make this extra income without leaving work and don’t need to be a landlord, but you can enjoy the results.
– Purchase Checked Rental Properties
Another alternative to traditional investing is to buy pre-vetted properties. You just need to buy a rental property and have a positive cash flow
– Investment in Real Estate Limited Partnership
This investment is one of the passive ways to profit from building malls or other buildings. Usually these contracts are limited to a certain period of time.
You as a financier will be referred to as a limited partner who gets a periodic distribution or a share when the property is sold and the agreement is automatically forfeited. This type of investment is not liquid because it is not sold in the capital market. Its personal nature makes it mandatory for you to do a due diligence before investing.
– Join the Estate Investment Group
Real Estate Investment Group is a kind of mutual fund for property rental. A company might build apartments and sell to investors through that company. One investor can buy several units while the company is the manager.
You don’t need to take care of many things, just passively receive income, but you still need to test your dues before investing.
3. Take an Active Role in Real Estate Investing
This active role obviously gives you more benefits. The strategies commonly used are:
– Buy and Rent
Renting property is the most common way property investors do. The approach is to consider the location and market rent of the property. Choose a strategic place and there is a potential for market appreciation. Make sure the rental fee you provide is quite profitable.
The costs you need to budget for are the mortgage, interest, maintenance, maintenance costs, taxes, insurance, if not occupied, equipment, and other costs. Usually the rental price uses the 1% rule where the rental price is at least 1% of the purchase and all costs incurred. But there are many things you need to consider before listing the rental price.
This investment capital is quite large, even if you will use the services of a property agent, you need to know the ins and outs before investing so you don’t lose.
– Fix and flip
For those of you who are graduates of civil engineering or architecture, this type of investment is suitable for you. This type of investment buys cheap properties with pathetic conditions and then repairs them and sells them or rents them back.
The cost is obviously expensive because it requires the cost of transferring the name of the property, taxes, insurance, property agent services, not to mention the renovation. The amount of capital and the possibility of not selling make this investment unsuitable for beginners.
– Wholesale Properties
The term is a broker, you can bring together investors and homeowners without the need to own your own property.
4. Become an Estate Expert
There are many ways to learn real estate investing, you can start by studying by doing or working in the property sector. Take a property course to fully understand the property investment flow.
If you like watching, look for tutorials on YouTube. No less important, you have to read a lot in order to understand the investment philosophy.
You don’t need to be an expert in all fields, you just need to learn the value of properties and rental places around you.
5. Make Friends with Other Property Investors
Join online forums to chat with other property investors. When you upload a question, you will find answers from members of that community.
Try to find DIRE gatherings around you and try to build relationships from there. When you can enter the community, you will learn from other people’s experiences.
6. Recognize Real Estate Risks
All investments always have risks. Price fluctuations make you have to be careful in determining the buying price and selling price. The difference with stock investment, the capital is large and the sale takes time.
If you like high risk and expect quick returns, then you are definitely not a good fit for a real estate investor. Property investment is long term and if you expect high selling prices, you need to wait a long time.
The main risk is that you buy the wrong property at a high price. It’s different if you live in it yourself, property for investment should be lower than the market price.
It is important for you to understand the laws that apply in the area of the property. The cost of each area is different and you need to check the background of the tenants so as not to disturb the peace of the local residents.
Property investment is not easy. With high profits, you also need for heavy work. A good property investment strategy is to build relationships with other investors and increase your knowledge. Now is the time for you to start investing!
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