Just like any other business, real estate investment comes with a number of risks. Though there are many associated success stories, should a first-time investor lack some basic knowledge regarding what to do and what not to do, they are bound to experience losses that could lead to huge debts.
Real estate investment requires significant capital, regardless of the decision to rent, resell, or the type of property invested in. It is therefore advisable to take certain measures to ensure the venture is profitable (or you at least breakeven), so that you don’t suffer huge loses if your investment plans fail.
1. Gather the necessary intelligence
Depending on the buyers or renters that you’re targeting, you’ll need to conduct adequate research before you attempt buying real estate property. Firstly, ensure the property is in a location that will appeal to your intended clients. Also, be sure to make your purchase decisions based on logical financial factors, rather than your personal preferences and inclinations. Try as much as possible not to rely on your emotions when making a purchase.
2. Stay logical rather than emotional
Many investment mistakes have been made by allowing emotions take the lead in the decision-making process. Letting your heart lead in your purchase decisions is absolutely fine if you’re buying a house for your own use. In business however, you’ll need to stay logical if you intend making the right decisions in your choice of property and during negotiations.
3. Make profit and expense calculations ahead of time
To stay in the safe zone, you’ll need to consider all expenses and estimated profit that comes with the property. You can begin by calculating the cost of purchase and renovation, and don’t forget to include the operational expenses. Calculate the amount of money you’ll need to borrow, on top of the amount you already have. Decide on a listing price for the property and subtract the expenses to get an estimate figure for profit.
4. Consider Finance options
It’s common to obtain bridging loans when making property investments. Bridging finance (here is a great bridging loans calculator) short term loans that serve to fill the financial gap that exists between the time of property purchase and time of sale or rent. There are also other options available when it comes to obtaining funds for property purchase. Conduct sufficient research to find out the best type of loan that will suit your needs and help your financial situation, as different types of loans come with different unique benefits. You can consult a professional financial adviser to tell you more about the choices available.
5. Select a low cost property for your first investment
Choosing a low-cost property for your first real estate investment will ensure you stay in the safe zone, whilst gathering the necessary experience you’ll need. Even if you don’t enjoy a profit, you won’t face the unpleasant experience of making a great loss, which could discourage you from making other real estate investments in the future. Also, keep in mind that you will need to allow for other expenses apart from the cost of purchase.