Selecting the type of property investment that’s right for you
When it comes to property investing, we’re spoilt for choice. So before you start physically looking at properties, narrow down the options by considering what type of investment will best suit you.
First step is to know your budget and find out what financing you can obtain. Factor in all purchasing costs such as transfer and renovation costs. Then consider ongoing costs including rates, insurance, property management fees and potential vacancy periods as well as projected income. Calculate your cash flow – will you have a negative cash flow for a year or two before you break even or do you have enough capital to ensure a positive cash flow from the outset? How much investment risk are you prepared to take and can you afford a negative cash flow given your other financial commitments?
Decide what type of investor you are – are you wanting to plough time and money into fixing up a property or do you want minimal work? Are you looking at generating a rental income or do you want to upgrade and sell for a quick profit? Cheaper properties may need more work, but newer properties in a good condition may generate a higher rental income. Considering all these factors will narrow your search.
Also consider what type of property interests you – residential or commercial. While residential property may be easier to understand, commercial property can be more complicated. Options include office space, industrial units and retail space. Getting good value can be complex so consult a commercial property professional to make sure that you’re paying a fair market price.
Identify which area(s) you want to invest in selecting from areas that you know. It can be in your own neighbourhood or further afield, as long as you thoroughly research the area, average selling price, growth rates, vacancy rates, crime levels, council plans for the area, and any other factors that may influence the value now and in the future.
At the end of the day, investing in property is a business decision. Be cautious not to over extend yourself financially or get carried away with emotions. If you’re investing, you don’t have to live in the property yourself so make sure that your decisions are based on facts that will pay you handsomely in the long term.
First step is to know your budget and find out what financing you can obtain. Factor in all purchasing costs such as transfer and renovation costs. Then consider ongoing costs including rates, insurance, property management fees and potential vacancy periods as well as projected income. Calculate your cash flow – will you have a negative cash flow for a year or two before you break even or do you have enough capital to ensure a positive cash flow from the outset? How much investment risk are you prepared to take and can you afford a negative cash flow given your other financial commitments?
Decide what type of investor you are – are you wanting to plough time and money into fixing up a property or do you want minimal work? Are you looking at generating a rental income or do you want to upgrade and sell for a quick profit? Cheaper properties may need more work, but newer properties in a good condition may generate a higher rental income. Considering all these factors will narrow your search.
Also consider what type of property interests you – residential or commercial. While residential property may be easier to understand, commercial property can be more complicated. Options include office space, industrial units and retail space. Getting good value can be complex so consult a commercial property professional to make sure that you’re paying a fair market price.
Identify which area(s) you want to invest in selecting from areas that you know. It can be in your own neighbourhood or further afield, as long as you thoroughly research the area, average selling price, growth rates, vacancy rates, crime levels, council plans for the area, and any other factors that may influence the value now and in the future.
At the end of the day, investing in property is a business decision. Be cautious not to over extend yourself financially or get carried away with emotions. If you’re investing, you don’t have to live in the property yourself so make sure that your decisions are based on facts that will pay you handsomely in the long term.
