We live in uncertain times, but that doesn’t mean that you should be unsure of your investment. At Sandak-Lewin Trust, we care and that is why we have compiled a list of factors that should be taken into consideration before making a property investment.
1. Economic Cycle Be aware of the current state of the real estate market. History has shown that the real estate markets often follow a cyclical trend of expansion and contraction, similar to the broader economy. Although most real estate investments are made with a long-term view in mind, it will always be more beneficial to purchase your investment property at the bottom of one of these cycles.
2. Research Choose the right property in the right neighbourhood. Find out what properties have recently sold in the area and what the tenant vacancy rates are. It will help you understand what you will have to pay for a property and what the cash flow requirements will be to make the investment.
3.Cash Flow Be familiar with the cash flow – and not just the difference between the monthly rent collection less expenses, including the mortgage. Dig a little deeper to understand what the impact will be to your cash flow of other items such as the tax payable on the rental earned, the cost of evicting a non-paying tenant, or an unforeseen rise in property or interest rates. Make sure that you have some reserves to cover these issues should they arise!
4.Property Management Research the market well before you decide to give your property over to someone else to manage. Make sure that you have read testimonials from their clients – word of mouth referrals or social media research will assist you in determining who is worth trusting your asset with and who to avoid at all costs.
5.Financing Options Select the debt/equity ratio that will suit your personal situation best. This will involve approaching mortgage providers to determine what level of funding your income will support and add this to the capital/equity that you have saved up and are willing to invest in the property. Select the best available interest rate on the mortgage offered to you.
6.Condition of the Property Employ a professional building inspector to conduct a thorough inspection of the property before purchasing the property. Try to negotiate to have all remedial work addressed by the seller where possible before transfer.
7.Make the Property Lettable Ensure that you or your letting agent makes the property presentable for rental. There is always going to be a competitive rental market, so it is crucial to differentiate your property from the rest.
8.Long-term View Understand that unlocking the value of real estate is often a long-term plan, so be prepared to make short term investments in maintenance and upgrading your property, keeping the long-term goal in mind.