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Everything You Need to Know Before Investing in Property

Are you thinking about making some money on the property market? It’s a good idea, but here are a few things you should know before you start investing.

You Can Find Bargains at Auction

Most top real estate investors buy their properties at auction. This is because there are so many great deals that you can find at auction. The properties that tend to end up going under the hammer are houses that have problems or faults with them. These problems might be big or small, but they always result in a lower price being paid for the property.

This means that buying a property at auction often requires a willingness to do renovation jobs. But if you keep the repair and upgrade costs low, you can get a finished property for a lot less than it would have cost to buy a better property on the open market.

Follow The 1% Rule

When you’re thinking about how much to charge your tenants in rent, there’s a fine line to tread. You have to first look at the market trends and see where your property sits in relation to the other rental properties on the market. You won’t have much success if you charge more than the local average for properties similar to yours.

You also won’t have a very good relationship with your tenants if you’re ripping them off! But there you need to make money too, so follow the 1% rule. This is when you charge 1% of what you paid for the property in rent each month. At this level, you should make a profit eventually.

Keep Your Target Renter in Mind

When you’re looking for a property to rent out, you need to remember that you’re not buying a property for yourself, you’re buying one for your eventual tenants. You should have an idea of who you’re going to rent out the property to before you even buy it as this will impact on what you need from the property.

If you’re renting out a property to a family, an apartment won’t be suitable. You need a home with three bedrooms, and it should be located in a safe area that is suitable for bring up children in. You should also keep your target renter in mind when you’re decorating the property.

Be Aware of All Your Expenses

Buying a property for investment is actually even more expensive than it is to buy an ordinary property, I’m sorry to have to tell you. Firstly, lenders will use an appraisal company before lending to you and will tend to expect more in terms of your down payment if you need a mortgage. Interest rates tend to be a little higher too.

There’s also insurance to think about too. You can’t just use ordinary home insurance cover. If you do use this kind of insurance cover, the insurance company might not pay out if something goes wrong. You need specific landlord insurance cover, which will be a little more costly.

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Don’t let this guide put you off. There’s a lot to think about before becoming a landlord, but there’s still a lot of money to be made by investing in property.

About Stephanie

Stephanie Rosen is a financial market analyst and a blogger. She writes about stock market and investment opportunities around the world. You can find her latest ideas on here. Just signup our news letter today and receive regular updates of Stephanie.