Buying property as an investment - whether it is for your retirement, a regular income, or diversification of your assets - should be a rewarding venture. First and foremost, however, it needs to be an enjoyable and successful investment earning you money and making you wealthier.
First and foremost, however, decide on what type of investment you want to make.
Do you prefer a long-term property investment in a up and coming area that may increase in value with great upward potential? A property that has the potential to pay you higher rent year-on-year in the mid- or long-term future?
Or would you feel better with a property investment in an area with potentially less upward value potential but stable immediate income?
Here are the ten things to consider when buying property as an investment:
Buy only where you feel comfortable yourself:
1) If you don't feel safe, why should any potential buyer or renter feel comfortable in your apartment complex or the surrounding area?
2) It might first appear a well discounted deal; but be clear about what type of tenants you want. Tough neighborhoods are likely to get tougher tenants. That does not mean that wealthier tenants are always better. They might just as well damage your property. But research into human behavior shows people are more likely to be respectful and caring when they encounter a clean, well-cared for property than when they encounter a little cared for property or house with bad paint, bad wiring or flooring, or otherwise not in perfect condition.
3) It will be much easier to find tenants when showing them the property. As they walk trough the neighborhood, they are more prone to imagine themselves living and promenading the neighborhood. Particularly when having children or coming home late from work in the evenings safety and comfort become major issues.
4) Know your yield
How much can you expect to earn from rental return? What is the range? What is the average, worst, and best possible return for your property in that location?
It is crucial to know how much you'll be able to expect before and after tax in monthly and annual income
5) Understand how to earn the highest return
How can you get the best rental return? Study the market and see what other properties achieving the maximum rent offer and how they are equipped? Do you need to offer a garage, a cellar space, a modern kitchen, or a balcony?
6) Choose your property investment based on the above criteria. Certain features of your property can be changed. You can put in a modern kitchen or beautiful parquet. Other features such as a balcony or cellar space are almost impossible or too expensive to add limiting your potential to earn a maximum return when the market requires said features.
7) Research the average incomes of the area you're buying in. How has the average income developed over the last years and how stable is it?
Only those with the appropriate incomes will be able to afford your rental demands.
8) Do your market research in terms of demographics. What type of jobs, qualifications, age, crime rates, and various other cultural, personal, and social criteria characterize the neighborhood, town, city, and geographical region that is home to your property investment? How have these factors changed and what is the likely trend? Do younger and wealthier people move there? Is the neighborhood primarily home to wealthy baby boomers? All these factors will affect the rentability and potential rent and tenant you get to hope for.
9) How does your area compare to adjunct regions? Is there potential if spillover effects both negative and positive? Do people move out of surrounding areas and are starting to move into your area, because prices and rents are cheaper? Or are you next to a troubled area that appears to be expanding its tentacles?
10) What are the city's plans or the chosen area? Are politicians planning to lower taxes to bring in new businesses? Are they planning or re-urbanizing the town center to make it more appealing to middle and upper class or families? Are new parks being built and theater or cinema shows offered to attract a more affluent crowd?
Good luck to you as a property investor. And most importantly: Have fun doing so.