Investment in property is one of the most popular types of investment. This usually means when you buy, own, and then manage a property with the intent of generating profit. Many people are interested in investing in property because, generally speaking, its value increases with time. As such, your returns are more or less guaranteed. However, there are downsides to investing in property. Property investment has limited initial cash returns; it usually requires significant capital to begin with, and ongoing cash flow to maintain.
We’ve compiled a list of 5 things to consider when you’re investing in property:
What type of property are you investing in?
There are four main types of property you can invest in – industrial, residential, retail, and commercial. Naturally, residential real estate is the safest type to invest in, as people will always need shelter and be looking for somewhere to live. All being well, you should find tenants for your residential property. However, commercial, retail, and industrial properties offer far higher profit margins in comparison to residential properties. Yet, with these types of property, there still exists a much higher risk of vacancy or failed rent payments if the economic climate is poor.
Is your personal income stable?
When you invest in property, you’re making a huge financial commitment. In the initial stages of an investment, you will find that you are spending money more often than you are getting it back. In order to weather this storm, you need to make sure that you have a stable income. Ascertain whether you are using surplus cash and make a financial projection for the next six months. If you find that your income will remain stable enough during this period, you are financially ready to invest.
Where is the property located?
When you’re dealing in property, its location should be one of your most important considerations. Make sure you perform thorough research on the area where you are planning to invest. Does it seem safe? Does it offer good transportation links? Is it in a commercial hub? Are there nearby educational facilities? These factors should be crucial to your decision.
What are the property’s characteristics?
You need to carefully think about the condition of the property you’re interested in. If you’re buying a house, for example, think about the infrastructure which surrounds it – its roads, street lights, and pavements. Think about the structural integrity of the building; is it a sound layout? Will it withstand the test of time? These are important considerations, as the characteristics of a property can work to both attract or deter tenants.
What kind of insurance will I need?
The kind of insurance you will need depends on what you’re planning to do with the property. If the property is going to form part of your business, you will need specific insurance depending on your company’s line of work. If your company works with the public, for example, you will certainly benefit from taking out public liability insurance.
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