Tips for property in­vest­ment

Lesotho Times - - Property -

WHEN it comes to build­ing a re­tire­ment nest egg for the fu­ture, property is still re­garded as one of the safest long-term in­vest­ments.

While some in­vestors may want to buy a property and rent it out straight away, oth­ers may choose to live in the home while they ren­o­vate it.

In­vest­ing in bricks and mor­tar can be a great way to cre­ate wealth, but there are some golden rules to con­sider be­fore tak­ing the plunge into property in­vest­ment.

1. Know your bud­get Be­fore in­vest­ing in property it’s vi­tal to have a thor­ough un­der­stand­ing of your cash flow. Also, ask your bank for a pre-ap­proval of your in­vest­ment loan, so you know how much you’re able to bor­row be­fore you start hunt­ing for prop­er­ties.

2. Don’t un­der­es­ti­mate ongo- ing costs Make sure you bud­get enough for rates, in­surance and gen­eral re­pairs. And when you have pur­chased your ideal in­vest­ment property do what you can to pre­vent costly main­te­nance is­sues aris­ing, such as re­place age­ing taps.

3. Buy in a growth area Try to choose an in­vest­ment property in an area where there is strong de­mand for rental ac­com­mo­da­tion. Buy­ing a property close to trans­port, uni­ver­si­ties and schools will make it more at­trac­tive to renters.

4. Be re­al­is­tic about your in­vest­ment goals Are you look­ing for fast cap­i­tal growth or want­ing to hold the property long-term? Dur­ing boom pe­ri­ods, it’s much eas­ier to ren­o­vate prop­er­ties and turn them over for a quick profit. In slower eco­nomic times, it may take many years to achieve the same growth.

5. Build sweat equity Pay­ing trades­men to ren­o­vate your in­vest­ment property is costly. If you’re pre­pared to get your hands dirty you can save money and in­crease your profit mar­gin by do­ing the work your­self.

6. Look for live­able not lux­ury Re­mem­ber a rental property only has to be clean and func­tional. Don’t get sucked into buy­ing a property sim­ply be­cause it has a stylish in­te­rior.

7. Buy with your head not your heart When house hunt­ing it’s very easy to get caught up in emo­tions. While a home on a steep block may have a stun­ning view, it could be a night­mare to ren­o­vate due to re­tain­ing or ex­ca­va­tion costs. Be sure you weigh up the pros and cons.

8. Think care­fully be­fore negative gear­ing If your re­pay­ments on the in­vest­ment loan won’t be fully cov­ered by the rent, your property will be neg­a­tively geared. While this can have tax ad­van­tages, it can also lead to

9. Still pay­ing off your own home? It isn’t nec­es­sary to have your own home fully paid off be­fore buy­ing an in­vest­ment property, how­ever it is im­por­tant to be com­fort­able with your cur­rent debt lev­els. Ideally you’d want to have a large por­tion of your own home paid off and other debts, such as credit cards, un­der con­trol.

10. Get a build­ing in­spec­tion Be­fore sign­ing a pur­chase con­tract, take the time to un­der­stand the build­ing re­port to avoid ex­pen­sive re­pairs down the track. Ter­mites are one po­ten­tial prob­lem to watch out for. —

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