When you consider buying an investment property, you have to be smart as it involves putting in a significant amount of your capital. Investing in real estate can prove to be a fruitful decision when you do it right. A right investment property can earn you equity gains and passive income. You have to keep in mind both the general property investment guidelines and market trends when choosing a property for investment.
If you are planning to buy an investment property for the first time, you may feel overwhelmed by the number of factors that need to be understood in order to make a good purchase. However, to help you get started, here are some key factors that determine whether a property is worth your investment.
Consider the Location
One of the key components that determine the value of any real estate is location. Therefore, think of the location of your investment property before you purchase. Buying the right property in the wrong location is not going to earn you good capital gain or return on investment.
For instance, if you buy a stunning vacation property in the area where people are less likely to go on vacation isn’t going to be profitable for you. Therefore, you have to do proper research about the location you should choose while keeping in mind the clients you are targeting. Make sure you select the location that will attract the people you intend to sell or rent to. Buying an investment property situated in a location that appeals to the market can yield the returns you are expecting.
Have Money Prepared for the Down Payment
The down payment for an investment property is not the same as for a standard property. The down payment can be 20% to 30% for an investment property. That is why you have to get your money prepared for making the initial down payment when you consider buying an investment property. An investment property requires a more substantial down payment because it doesn’t qualify for mortgage insurance. However, your income, credit score, and debt to income ratio are some basic variables that define how much down payment will be expected from you. Therefore, have your finances prepared before you go on an investment property hunt.
Anticipate the Risks
As with any kind of investment, real estate investment also comes with its risks. So, you should anticipate and understand every possible risk involved in buying an investment property. Engage a professional when making property investment in Melbourne. A leading real estate professional who understands the local property market will help you buy the right investment property at the right time.
Some of the significant risks can be the unexpected expensive repairs, the local economy could affect the market value of your property, bad tenants could result in renovation costs or even eviction costs, and property taxes could increase. Moreover, another important risk is that you might not get the capital gain or rental income that you expect.