10 Reasons to Buy your First Investment Property
One. 2009 is a good time to buy for a cashed buyer – It’s 2009 and there is a global recession, there is no shortage of foreclosures, or mortgagee sales. Get hunting for bargains. As fewer people can afford to buy, as times are hard, there are more people looking to rent, which drives up rent.
Two. You can share the risk, and cost – You can make fairly small investments if you share with others, however your return will still be equal to your percentage of ownership, and the overall gain in value of the property.
Three. You are in control – The performance of any investment is not guaranteed, however, a bricks and mortar investment may provide you greater control than other assets.
Four. Capital growth – Investing your money in the bank will not make you any capital growth. It may hold it’s value and be safe, however when you take inflation into consideration, you stand to gain very little. However, with property investment,…
Property Investment Leverage
The key concept in property investment is leverage. If you have experience in the industry you may already understand this concept, but for the benefit of those who are new, I will explain it. Leverage is your ability to increase your returns by using other peoples’ money to increase the overall value of your investment. With property investment it’s usually the bank’s money.
It makes more sense if you look at some numbers
Say you have $30,000 to invest. This would need to be a lump sum to invest in the first two options, however for option 3 it could be equity from your main residential property which you live in. Lets look at the best way to invest this money?
Option 1) Place your money into a term investment or savings account with your bank
We would be looking at about 3-4% return. After you consider tax on profit, and inflation you are going make very little progress at all. Although, your money…
Property investment – How much risk are you willing to take?
Property is like any form of investment, where the greater the risk you take the more potential you have to make greater profit. Ultimately how much risk you take my depend on where the money you invest has come from, and to what degree of trouble you would be in if you were to lose it!
What time scale are you working on?
The time scale you are working on will affect the level of risk you may need to take to see a positive return. Where there are many safe investments that will make a nice return over a period of 5 to 10 years, there are very few that are risk free for a period shorter than 12 months. It is my opinion that property investment should be seen as a long term strategy for profit.
Spreading Risk
One way to reduce the risk involved in an investment is to spread that risk across several different projects. If you are lacking in…
Investment Property Checklist
As part of any smart property investment, a good idea is to develop your own Investment Property Checklist. There is a lot to consider when investing in a new property, and it goes without saying that it is likely that you will be dealing in large amounts of money. So why not do yourself a favor, and build your own Investment Property Checklist. I have put together some thoughts below, however, it is important to make a list that suits your goals, and plans. What is key for me, may not be a consideration for you.
1) Do the sums, and if they don’t work out walk away. Always buy within your means.
2) Check the property, and inspect for defects, if there is anything that concerns you, pay for a building report. It is better to waste a few hundred now, than to throw away your investment on a leaking building. At the very least you can use any problems with…
New Zealand Investment Property
New Zealand is a lovely place, it has a fresh green image, and despite it’s relatively remote location it still does very well on a global tourism market. However, what are the benefits of investing in New Zealand property, and if I am a foreigner, is it worth my time.
Positives
New Zealand does not have a capital gains tax, so when you sell your investment, you get to keep all of the profit.
New Zealand has a deprecation value of 4 percent per annum. This is a much higher rate when compared with Australia for example, which has a deprecation value of 2.5 percent. This means investors can claim a larger amount of a properties depreciation earlier on in the investment, which makes an investment more profitable earlier on.
Negatives
You will likely find it very hard to get finance from New Zealand banks as an international investor, so you will need to source money from else where.
As with any foreign investment property, you…
Choosing Property Investment Locations
Location Location location
When investing in property location is one of your key factors to consider. Researching your location, and ensuring you are making a good purchasing decision can be the difference between purchasing a great investment, or ending up with a lemon. So when looking at locations what are the main considerations:
Rental Potential
The rental potential of a property is always going to add to the value. A house may be run down, and lack any street appeal, but if it is in an area of high rental demand, there is a good chance that it will still be a sound investment. Areas that typically have high rental demand would include places close to tertiary institutes and universities, students may not make the best tenants, but there is never a shortage in demand. Any where close to large employers. Hospitals are a good example. Places of convince, close to CBD’s or to key services such as public transport. Ask your self…
