Property investment: are you ready?

REAL estate is a proven wealthbuilding tool. Investing in rental properties can generate income and significant tax benefits as well as build equity over the life of the property ownership. But, as with everything, you need to do your homework before diving in head first. You should ask yourself a few questions, like what do you need, what should you look for and expect, and most importantly, is investing in property right for you and your finances. “Although many succeed investing in real estate, it isn’t for everyone,” explains Paul Stevens, Just Property Group COO. “You need to take into account your investment preferences and even personality. Do you have the time to devote? Are you comfortable troubleshooting problems or would you prefer to hire a property manager?”

Stevens uncovers some key principals of success. Are you financially fit? Pay attention to your budget. Successful real estate investors build their portfolio through saving money and gradually buying properties over the years. Also, check your credit score, which determines the rate and conditions you receive on a bond. If your credit score is high, meaning you pay bills on time and haven’t “maxed out” your credit cards, you’re a good bet for lenders and will be offered a low rate with good conditions. Can you place a deposit? Putting at least 20 to 25 percent down opens you to the best terms.

Focus on residential properties Residential property is an attractive investment and is easier to understand, purchase and manage than most other types of property. And if you’re a homeowner, you have already navigated the process and understand residential property maintenance.When it comes to your residential property options, start small. Sectional title townhouse homes are a good start and work well for investors who don’t want to deal with building maintenance and security issues. Seek out development Areas where there is new development or redevelopment are where you want to be. The best investment properties are well located and physically sound but “cosmetically challenged”. Location, location, value Location is important, but so is finding value for your money. Owning real estate in up-and-coming areas with new development or renovated properties enhances finding and keeping good tenants and leads to greater returns. Invest close by Buy within a two-hour drive. Venture further afield only when you really understand another property market and regularly find yourself there for other reasons or if you’ve found an excellent property partner to manage your investment. Have a “killer team” in place Line-up a real estate agent, financial advisor and lawyer early. The investor with the best resources can identify properties to ignore and makes an agile buyer. The pace at which you can close a transaction is an advantage in any market. Bottom line Project the net operating income (NOI), preferably for the next few years. Projecting the NOI is time consuming and requires experience, especially if you plan property changes to increase income and/or reduce expenses.