5 Basic Tips for Investing in Real Estate if you are an entrepreneur
Investing in real estate is becoming increasingly popular amongst entrepreneurs, and if managed correctly, can prove to be an effective way to boost your financial wealth and set you up for a wealthy future. However, you need to take into consideration that investing in real estate is not a quick fix for any financial woes - in fact, it is quite the opposite. These five investment property tips will help you on the way towards building your portfolio and enjoy financial benefits over the long term as a property entrepreneur:
1. Find a good property manager
The first step is to find yourself an experienced, passionate and knowledgeable property manager. While you can do this job yourself, there are many benefits to hiring a professional, especially if you have multiple properties on the go. A property manager is a licenced real estate agent who can help with everything from finding and managing tenants (including reference checks and bond collection), ongoing rent payments, property inspections, maintenance requests and dispute resolution. They are also informed on relevant laws and can advise you on your rights and responsibilities, as well as those of your tenants. Most property managers are paid from a percentage of the rent you will receive, so it is easy to factor into your budgeting. Keep an open line of communication with your property manager so you can stay on top of what is happening with your investment at all times, but let them do the legwork!
2. Patience is key
Purchasing an investment property is not a sure-fire quick-fix to financial wealth, you may need to keep your property for many years before it is worth selling. You could strike it lucky during a boom, in which case you could snag a quick renovate and flip job for a tidy profit, but most of the time, you need to be patient. The luxury of time gives you the advantage of getting to know the market and building your portfolio one property at a time. It also gives you the opportunity to build your wealth through refinancing, investigating alternative investment loan rates, conduct further renovations, or changing your renter situation. Just because the market is on a high, doesn't mean it is the right time to sell, so always be cautious and get some advice specific to your own situation as it is all about managing your risks. In the meantime, ensure you can still live your own life while you sit on your investment - do your sums and don’t leave yourself short - which brings us to the next tip:
3. Don’t underestimate ongoing costs
While on initial investigation, it may look like you can well and truly afford the costs of your investment property, but there are ongoing costs you need to also factor in. It is a good idea to have an estimated sum of money available at short notice for any unforeseeable problems, such as a leaking roof, storm damage or a hot water system that has packed it in. To help combat these ongoing costs and keep your property investment viable, make sure you have a steady rental income from tenants. This is where the property manager is a vital asset.
Another aspect to note is negative gearing. Negative gearing is where the repayments on the investment loan won’t be completely covered by income from rent. Essentially, this means it’s a loss. You’ll have to be careful about being able to cover the shortfall until tax time. Interest on investment loans are usually tax-deductible, which can give you another little break at the end of the financial year.
4. Finding the right house
Once you have found your agent and made sure your finances can support an investment property, you can get excited about shopping for that perfect house. When it comes to finding the right place, location is always key. This gives you the opportunity to build fantastic equity and set yourself up for purchasing your next property find. You may also need to factor in renovation costs to your investment loan but make sure your total cost isn’t going to exceed what you will likely sell it for later on.
When looking at investment property, always buy with your head, not your heart. While you want to purchase a place you are confident will rent for a decent sum and sell for more when you are ready, you don’t have to live there yourself. Let your buying by guided by knowledge of the area, local rental trends and smart forecasting into the real estate future. Do your research, speak to professionals in the area and take your time. At Sutton Group West Coast Realty, we have properties listed all across Vancouver and the professional real estate expertise to help you with any questions or concerns you may have.
5. Get a building inspection
The last of our investment property tips is to ensure you get a quality building inspection before you sign the sale documents. Termites are a major concern to look out for, but there are many other hidden problems a building inspector can highlight for you. This includes dampness in floors or walls, cracking, rust, functionality of doors and windows, safety of the electrical system and the structural integrity of the building and external structures such as a garage or shed.
It is a good idea to have your property inspected by a professional once a year to ensure it is up to scratch. This also gives you a head-start on potential maintenance costs as you can get onto any relatively small problem before it becomes a major expense.
Kym Wallis, the founding director of Higher Ranking has over 15 years of advertising sales, digital strategy, and business development experience. He is currently working as Digital Adviser
for Acclaim Rewards.