Assume a scenario where you are unsure whether a potential property purchase would make you or break you; so you decide against going for the investment, just to find out that the property was literally a gold mine. You might even want to kick yourself if you find yourself in a situation like this. On the other hand, you might end up investing in property which you might even have to sell for half the price later.
If you don’t want to find yourself in situations like this, then you need to be good at spotting the ‘gold mine’ properties. Good property investment decisions come from years of experience and intelligence. You might not have the first one under your belt, but you definitely can do better with the second one. In this article, we are going to share the secrets of property investment with you. These are advanced strategies, successfully used by market tycoons. Let’s begin, shall we?
Determine your method of making a profit
When you are willing to make some good bucks from property investment, you need to keep two things in mind. There are two major ways real estate can make you some money. The first one is the resale value, and the second is the rental value. Though many benchmarks can overlap, you need to adjust your strategies based on your preferred way of making a profit from the property.
Here are the things you should be aware of if you are willing to sell the property for a better price afterwards:
• Room for renovation: If you want to increase the value of the property, then you need to add something to it. Otherwise, the increased value won’t be justified. A renovation can be done for two purposes: upgrading the facilities, and beautification. The first one will probably cost you more money, but if you are smart enough, premium beautification can be done at a lower cost. In terms of upgrading, replace the old pipes, install better electrical facilities, replace old windows, and add more features in the kitchen and bathroom. Such upgrades will make the house more luxurious, and potential customers won’t mind paying more. Recoloring the house, adding a beautiful garden, or remodeling it with a well-designed interior can beautify the house a lot with unchanged amenities.
• Look at proximity: The property needs to be situated in a neighborhood that has everything in close proximity. For example, if supermarkets, schools, restaurants, bars, and amusement parks are in close proximity to the property, then the price of that property will gradually go higher as time passes by. If it is easy to move from the property to desired areas of the city, then transportation costs are minimized to a huge extent, which adds more value to the property. The best kind of property in this case is one that is situated in an area that is undergoing rapid development. If you purchase property in such an area during its development phase, then it is highly likely that you will be able to resell it at a much higher price after a few years, once the development process is completed.
• Economic activity: The economic activity occurring around the location of the property will determine the price quite a bit. Usually, areas with a lot of economic activity going on tend to have higher prices on property. It happens because the people who wish to own property in those areas have higher incomes or assets, and are able to spend more. On top of that, demand is quite high in these areas. So, if your potentially profitable property is situated in an economically vibrant area, then chances are higher that you will be able to make a lot of profit out of it in a few years. Like the previous point, it is better to purchase property in areas where massive economic activity is about to start. Newly industrialized areas are best in that regard. You can purchase the property cheaply, and then sell it for a huge profit once the area becomes economically vibrant.
Rental property can also help you make some good profit, though it will take time. But if you are patient enough, then you can definitely try this option. You need to know the following basics:
• Type of tenants: The type of potential tenants matters a lot when renting out property. It depends on their purchasing capability and necessity. You can plan your strategies based on that. For example, if your property is near a university, then it is very likely that university students will need a place to rent. They are usually unable to pay huge rental amounts, but what you can do is to turn your property into a hostel that rents rooms to students individually. This way, you can make your desired amount of profit. On the other hand, if the property you are thinking of buying is situated in a tourist spot, then people who are willing to spend their vacations there are the targeted tenants, and they will come seasonally. So, you have to keep that in mind and aim for profit when tourists will be in the area.
• Criminal activity: This is very important. If your property is situated in an area with a high crime rate, then people might not want to rent a house there. That’s why, before purchasing the property, you need to make sure that you have accurate information regarding criminal activity in that particular area. Moreover, in terms of theft and robbery, you might have to take responsibility if security is inadequate. To avoid that, you might have to pay extra for additional security to attract tenants.
• Opportunities for tenants: This is quite similar to the points of the previous section. If potential tenants see enough opportunities like jobs, entertainment, education, etc., they will not mind paying more for rent. If you purchase a house in a barren neighborhood near the woods that doesn’t have much activity going on, then it is highly likely that you won’t be able to make that much profit via rental.
• Quality of life:
Last but not least, monitor the level of quality of life you are able to provide your tenants, and at what cost. For example, there are areas where you can build house pools cheaply. Having an in-house pool installed increases the quality of the tenant’s life quite a bit. If the costs are low, and you think such enhancements can draw the attention of potential tenants, then you should definitely go for it.
Watch out for bubbles
This is more of a precautionary step. You must watch out for housing bubbles. That is to say, you need to do some research on the property market to know if the price point of a property is artificially inflated or not. Because of the housing bubble that burst in 2008, many people lost their investments and ended up on streets, as they lost their properties too. Real estate investment is risky, so you need to make any moves wisely.
If you think the price is artificially inflated, then it is better not to invest. But if you do decide to invest in an inflated market, then it is better to get rid of the property at the earliest opportunity. You shouldn’t be greedy and wait for the price to go even higher. Sure, there is always the possibility that prices will go higher, but also the possibility of a bubble being burst is there as well. It is better to walk away with a smaller profit margin rather than losing a lot.
So, now you have a beginner’s insight into property investment. Are you looking forward to making some money in real estate?
What do you think of our tips? Let us know in the comment section!