Things to know Before Buying Investment Property

Things to know Before Buying Investment Property

You probably have heard stories of people who made fortunes with property investment and you want to be part of the count. Real estate, like every other business, has it’s many success and failure stories. 

Investing in real estate requires a good amount of cash investment which makes it critical to take extra measures to ensure return on your investment or at least save yourself from huge losses.

Types Of Investment Properties

You will first need to decide on what type of properties you want to invest in and that is also dependent on your vision, goals, budget and expected return. 

Different types of investment property such as Residential, Apartments, Commercial Office & Retail, Industrial, Warehousing, Tourism, Specialized Properties, etc differ in terms of potential return, investment requirements and complexities of investment and management

Even if you are ready to invest up to a million dollars in your first investment property, it is always a good idea to go for properties that lie in the lower- to mid-range price brackets. Since it is your first investment property, keeping your investment as low as possible will help you stay in the safe zone. 

Research Your Location & Opportunities

Depending on the clients you are targeting, you need to do proper research before buying your first investment property. Make sure that the property is situated in a location that will attract the type of clients you hope to sell or rent to, that it will reach the returns you are expecting and that it will appeal to the market.

You should consider the strength of the location, the rental yields that are achievable, the level of demand and the potential for capital value growth. It’s also important to look into areas that have positive expectations for price growth and a proven record of investment success. 

For example here in Zimbabwe we have places like Pomona, Marlborough, Greendale, etc offering many opportunities due to their strategic transport links through Harare Drive and potential price growth through regeneration. Places like Bindura, Chinhoyi and Bulawayo with opportunities for Student Housing and Hwange, Kariba, Nyanga, Victoria Falls, etc being good locations for Tourism Investments.

Calculate your Expenses and Return on Investment

It’s essential to sum up the money that you already have and what you can borrow before proceeding to buying your first investment property. Also consider how much it would cost to renovate the property on top of the purchase price. 

Keep in mind the operating costs. Finally, estimate the price you are going to sell your property for or the revenue you are going to generate from rentals and cut out the expenses to get a rough estimate of the return on investment you stand to make. 

Be Aware of the Applicable Taxes

As an investor you need to be aware of the taxes to be paid for your property on a monthly, quarterly, yearly basis or at entry and exit level.  

Local Authorities, Rural District Councils and other Local Government establishments also charge rates and levies which you need to be aware of. 

Speak to your estate agent, they can assist you in calculating how much a certain investment property will require in property taxes, rates and levies.

Plan on Hiring A Property Manager

You also need to decide whether you want to handle property repairs, tenant management and maintenance yourself or if you’ll hire a property manager to manage on your behalf.

As a first time investor, you need to carefully consider the many factors above and beyond to succeed in this complex investment game, you need to fully manage your risks and choose your partners carefully. 

Like every other business, investing in real estate can go either way: You could earn a fortune, or it might turn into a disastrous experience. If you follow smart tips and play it safe from the start, you will surely be on the winning side.