The 8 Must Nots of Property Investment
by: JamesL.Hardcastle |
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In the property investment field, there are eight basic rules which you must follow if you are to be a success. These rules are often called the eight must nots. These rules are easy enough to understand: Don't rely on seminars, don't forget practicality, don't ignore the numbers, don't limit yourself, don't cut yourself short, don't go it alone, don't get attached to your investment properties and don't assume anything. Now, for a more in depth look
Rule Number One: Do Not Rely on Seminars for Wise Investments
If you're really interested in a specific seminar, of course you should go - just don't expect to get specific information which you can use for your investments. General market information can be had from the speaker, which is certainly useful, but always keep in mind that the speaker is only giving their point of view and you should have one of your own.
Ask yourself exactly what you stand to gain by going to this seminar. Then, ask yourself what exactly the speaker gets out of it: why are they pushing this particular area of property investment? Look into it and determine if there is money to be made or if your time and money would be better spent elsewhere. Before you invest anything, know all of the facts.
Rule Number Two: Do Not Cut Yourself Short
Factor in all the costs of an investment and make sure than you can really afford it. Leave room for unknown costs (they have a way of cropping up). Compare locations and the costs of different properties and evaluate whether it will be cost effective for you to buy them; remember that there may be repairs needed - factor in the time needed too. You'll also have to be prepared to pay for insurance, inspections of various types, adjustment expenses, valuations, depreciation, mortgage insurance, real estate broker's fees, taxes, utilities and any other costs you may incur while you own this property. Don't rely on others for this information - do your own research. Don't count on income from rents to cover these costs either; be certain that you can pay for all of this without that income.
Rule Number Three: Do Not Assume Anything
Never ever assume anything. Rather than guess, find out the facts. As an investor, you need to know everything in order to make a wise decision about whether or not to invest in a given property. This is not a game of overnight wealth. While you can indeed get rich with property investment, it does take time, dedication and a lot of hard work on your part. You have to know all of the facts at every step in the process. Asking price, calculated return and how much money you'll have to spend on the property before you can resell it for a profit. You need to know how much rent you'll receive and how the tenants are before you proceed.
Rule Number Four: Do Not Ignore the Numbers
Watch your numbers. Do not borrow more than you can afford. Remember, this property needs to make you money, it's not where you will be living. Think of it as an employee. So the more debt you have the more interest you pay. So you must be able to afford to pay the mortgage regardless if you receive rent or not. Watching your overall cash-flow is definitely important. Remember to be prepared for the unknowns.
Rule Number Five: Do Not Become Attached
Remember, this isn't your home - so don't get emotionally invested in the property. Think of this property the way that a prospective renter or buyer might. Think of the property as you would anything else you want to sell - you want to get it into someone else's hands as soon as you possibly can. Think about how much you'll pay for the property and how much of a profit you can make by reselling or renting it.
Rule Number Six: Do Not Do It Alone
Don't go it alone; at least not at first anyway. You cannot be everything when becoming a true property investor. Learn the ropes form experts in the field. It may seem like the right idea to save money, but if you don't seek out professional help for all those steps involved in turning properties for profit, you will wind up losing money in the end. To do things right you will need a property advocate, mortgage broker, property assessor, inspector, and an accountant. It is also a wise idea to get a contractor whom you can trust to make some repairs that may come up from time to time. Be frugal, but no penny pinching allowed.
Rule Number Seven: Do Not Forget Practicality
The practical factors, will to an extent, determine the resale value of the property. Being near shops, schools and public transportation are all things to look for. Also, evaluate the neighbourhood. Is it safe? Are the schools well regarded? Knowing about the age of the home is important too. You should know if the wiring and plumbing are antiquated, if the home is well insulated and how it is heated and/or cooled. These are all things which buyers, renters and insurers will ask you.
Rule Number Eight: Do Not Limit Yourself
Each time you buy a property, it gets easier. You'll learn from each investment and will grow as an investor. You'll begin to grasp how to take advantage of the market trends. Don't limit yourself to just one investment.
Why Seek Help?
Having a good mortgage broker behind you can make all the difference. If you are turned down for financing by banks, look for a creative financing expert; they may be able to find other financing routes for you. Investing in property takes dedication and hard work, along with the willingness to lean from others. With the right financier behind you and all of your research in place, you can make smart and profitable investments.
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About the Author
Author: James L. Hardcastle will highlight how you can wisely invest in property to become profitable. Visit "Loans Australia" website for more great tips on property investment.
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