Exactly What Makes A Good Investment Property?
It is no secret that investing in property can truly make or break you. It is imperative that you invest in a good property, but exactly what makes a good investment property? The truth is, in order to become a good property investor, you need to know how the real estate market and the investment industry works. So, with that said, we will now answer that extremely important question.
Firstly, you need to know and understand the property cycle. The property market is actually cyclical and there are three main phases. These phases are known as the boom, upturn and slump. During the boom phase, that is when the prices of property are at their highest, which means that it is a property seller’s market. At this point, most property buyers have to try and outbid other buyers in order to secure a property. Also, at this time, financial institutions also make it much easier for buyers to purchase property. Many developers then start to supply the demand by creating more housing and this usually leads into an excess of properties. Since the supply then becomes higher than the demand, this leads to the second phase known as the slump.
During the slump, there is an excess of housing and not enough buyers. As a result, rental rates typically decrease. However, housing prices may not immediately decline but rather stay at a particular point for a long period of time. House sellers during this period usually find it difficult to get buyers and interest rates are higher, causing house owners to struggle to pay their mortgage. Lastly, there is the upturn when the price of properties and rental rates increase. At this point, properties start to sell much faster.
So, when it comes to investing in property, it is best to time your particular investments according to the current cycle. You can use the slump phase to purchase property at a much lower price and then sell during the high end of the upturn where you’ll get the maximum return for your investment.
Now, it is essential that you choose the right property to invest in, which means you need to do your research. You need to decide what type of real estate you want to invest in and the specifics of that particular type. For example, if you want to purchase a property and then rent out to tenants, then you need to choose a property that is not only attractive to tenants but is near your target demographic. You should always make sure that you buy property that would appeal to at least two different markets. So, for example, if you’re thinking about buying a property that is near to a university, then you should target both students as well as single young professionals.
Remember, it is essential that you put yourself in the shoes of your target market when selecting an investment property. For example, if you’re targeting young families, then you should ensure that the property you buy is near to schools, hospitals etc. Once you consider all of these factors, you will definitely find a good investment property.
In closing, becoming a property investor takes time and you will likely make mistakes along the way. However, once you always learn from those mistakes, you will become a much better and more successful property investor in time.