Right now is a really great time for investing in property, so what better way to conclude our mini-series of retrospective blogs looking back at our all-time best tips for investors.
So here goes:
Stick to the figures - Investment is very much about cold assessment of the facts in front of you. Property values, interest rates, the going rate for rentals in the area of the property, as well as likely ongoing maintenance costs all need to factor in your thinking. If the sums add up in your favor, it's probably the right move. If they don't, well you need to think very seriously before taking the plunge. Of course, there may be external factors, such as future development of the area you are investing in, that won't show up on a spreadsheet. That's part of the art of investment, of course, but any situation where the numbers don't add up should usually be considered something of a gamble.
Be in it for the long haul - Although you might get lucky, the best profits from property usually come from long term investment. Unfortunately, as buoyant as the real estate market is right now, prices aren't yet generally rising at a rate that's likely to see big profits from flipping a home (purchasing it, then rapidly renovating it and reselling it). A recent report suggested that flipping is likely to be most profitable when a housing market sees at least 10 percent year-over-year growth.
Location, location, location - Here's one area where the rules are identical for home buyers and investors. Purchase property in the very best area you can afford. Buyers and renters will always be more attracted to areas supported with nearby work, colleges, schools, transport, shopping and leisure facilities.
Thinking big can pay dividends - Your personal wealth and income will essentially dictate what you can comfortably afford to invest in, of course. Nonetheless it's worth considering a few scenarios where more ambitious deployment of your available resources can bring bigger rewards. Is it better, for example, to wait until your home is paid off before starting to invest? The more assets you control, the more they increase in a rising market. This may represent a greater short term risk, but the longer term benefits can pay off handsomely.
Be ready for that rainy day - Losing money in property investment very often arises when the owner is forced to sell before the time is right. This can be due to cash shortages in rough times. It's therefore not only common sense but best practice to have a sufficient cash buffer that enables you to cope with life's unexpected expenses, such as emergency repairs.
Think outside the box - Investing in property is a great way of developing a passive income stream. Whereas most people work a standard number of hours a week and retire at roughly the same age, others choose a more adventurous path to achieve more freedom and choice in their lives. Think like the typical person and you will undoubtedly get typical results. Do your homework, go against the grain and you will be amazed at what can happen. It's not for everyone, of course, but if you're the kind of person who thinks outside the box, you are probably well qualified to be a property investor, all other things remaining equal.
Rentals are rising and not likely to stop - A recent report from the Harvard Joint Centre for Housing Studies and Enterprise Community Partners, predicted that the number of households that spend half or more of their income on rent is expected to rise by at least 11% from 11.8 million to 13.1 million by 2025! Articles citing the Harvard report have talked of a flooding of the rental market by consumers who either can't buy a home or aren't yet quite ready to. The subtext of all this is that the future growth of rental income seems pretty assured for the foreseeable future.
Take full advantage of low mortgage rates - If you are looking to obtain finance for your investment, mortgage rates remain at incredibly low levels. How long they will remain so low is something that is very difficult to predict, so those who delay decision making in the next few months may regret it, in terms of reduced rental income profits etc.
Benefit from 1031 exchanges - The 1031 Exchange process enables an investor to sell a rental property and put the proceeds of the sale into another more expensive investment property purchase without paying any taxes on the proceeds (time limits apply). If you already own a portfolio, consider the potential to upgrade your rental income by upgrading to higher value homes in a very tax efficient way. Also remember that rental properties offer many potential tax deductions, including legal and professional fees, property taxes and necessary, ordinary and reasonably priced repairs (not improvements).
Hire professionals - We strongly recommend that you seek the best professional advice when considering a property investment portfolio. At Everest Peak Realty, we have considerable investment property experience and all the right connections to link you up with top professionals in the Albuquerque area who can advise you on every key aspect. Contact us today for an informal discussion relevant to your own situation.