Ask SCUDO: What makes a good investment property?
In the present day market, making an investment is one of the best ways of increasing your wealth. The market offers you the vast option of investment such as stocks, bond, real estate and finance. At SCUDO, we believe real estate investment to be one of the best! We’ve put some tips below to help you as your search for your first property.
If you are considering investment in real-estate you need to look at every aspect of it. Here are some expert tips before making the decision to invest in property:
Any investment should wait until you are in a stable financial position, paying off debt, creating a nest egg or “rainy day fund” and securing your finances should all take priority above investment. If you will be using a loan to purchase an investment property, you will need to put 20% down (unless you are purchasing a duplex or triplex in which you are planning to also live). If you are paying cash, you will simply need to present your proof of funds.
Research before investment
When you prepare yourself for investment, research plays a vital role. If we talk about real- estate market, the process usually works in the cycles. The value of the property is directly proportional to the strong market growth. During a certain phase, property value remains neutral and it may fall on other situations. If you are in a role of investor, it is important to know the present location of the cycle. It ensures you to secure the right price of your property.
Determine the right location
Location of your property decides how much revenue you are going to extract from it in future. If you are investing at the right location, your chances of greater return from your property are increased.
Factors you need to consider to find the right location are:
• Nearby amenities like; school, hospital, park and library. This also increases the value and desirability of a property
• An area that you are very familiar with and that is easily accessible to you is key for your first investment. If you do not live in an area that investment is possible, doing your due diligence to hire a trusted Realtor is key.
• Avoiding investing in any location dependent on a single industry. Though sole industry gives you profit when it is going well, it might become your worst nightmare if it falls.
• Investing in property where population growth is observed. More people means more infrastructure
• Location of the investment property from city. Access to public transportation, public facilities, market and other relevant facilities
Don’t ignore the importance of tax
In property investment, you have some sort of tax relaxation. However, as a property buyer, you will also incur some taxes.
Following are the taxes you need to know about if you are investing in a property:
Income tax– This tax is imposed on your income from the property. If your property is earning through rent or resale then you have to pay tax on it.
Property taxes – The tax is calculated as the present market value of the property times an estimate ratio times a tax rates, and is generally an accountability of the owner of the property. Values of the property are estimated by local officials.
Land Tax – This tax is implemented by all territory and states government, except Northern Territory. Land tax is payable at your own property no matter it is in use or out of use.
Moving on, let’s take a look at some of the pros and cons of investing in property.
Capital Growth – The value of property increases with time. Plus, if your location is in an appreciating area, you will have equity options.
A safer investment – Property investment, especially “buy & holds” or rental homes are often seen as a safer investment (when buying in A & B areas) because it’s a tangible asset you can monitor and liquidate fairly easily.
Anyone can invest – Investment in property requires research and good knowledge of the market, but any homeowner can easily transition into an investor by renting out their current property or reselling it after forcing appreciation with improvements.
Liquidity – If the real- estate market is down. It is not easy to sell property quickly.
The cost of maintenance – This cost is ignored by most of the buyers. Repair, maintenance and management of the property are all real costs that should be factored in.
From the decision of investing in real estate to actually making an investment, a lot of research should be done, and professionals in the local market should be consulted. In making any decision, you should make thoughtful consideration, but be prepared to take a leap!
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Need help searching for your first investment property, or want to learn more about Kansas City as an investment market? Contact SCUDO today!