The Less Obvious Things to Consider when Purchasing an Investment Property

Working in the real estate market requires commitment and determination, just like any other job. However, here you also have to possess a refined intuition for the right business moves.

One of the bravest decisions for real estate agents is definitely joining the investment crew. Instead of only buying and selling properties, now you have to learn more about finances, as well. There are lots of hidden traps in the property investment field, so let’s take a short tour of these features.

Eliminate debts from the past

Let’s assume that you have saved a certain amount of money and now you want to use it to make new profits. It is way much better than putting them to a bank account, where it will have no use.

However, if you want to make some bolder moves with your saved money, you should not make new investments until you have sorted out all your debts from the past. Be it a car loan, a debt on your credit card or unpaid bills, they need to be paid before you move on. If you have unpaid debts breathing down your neck, it could put you in an unpleasant situation.

Housing on shaky ground

People often seem to forget that housing is one of the most important economic growth generators. It is enough to remember the burst of the housing bubble in the US market in 2008 and the global depression it has launched.

Therefore, if you are not a millionaire, but a regular guy who just wants to invest their money in a property, you have to be extremely careful and well-informed about the current affairs in the housing field.

You might be a great real estate agent, but making direct investments is another kettle of fish. This is why you should get some advice from a professional asset advisory, to get the whole picture and calculate all the expenses that a property investment might cause.

Hidden property expenses

If you want to buy a property, you need to determine in advance what it will be used for. Getting it for the mere sake of buying is even worse than keeping your savings in a bank. The most obvious purpose could be buying it to rent it and make some money that way. However, you need to be aware of all the hidden expenses. Rental operating expenses on your gross rent could be between 40% and 50%.

Because of that, your net income might not be as high as you might have expected. For instance, renting a property for $2,000 will earn you about $1,000. If you had to take a mortgage to redo the place, the whole investment might be a total miss. Make sure to take into account all those expenses before you buy a property.

Leave flipping to big shots

Although buying an older house in order to turn it into a modern place might sound like an interesting idea, it is too big an investment for ordinary people. Here the profit margin is pretty low, which is why large companies flip dozens of properties.

When you flip 50 houses, you will actually make a substantial amount of money. On the other hand, flipping one or two property will cause too many expenses and very low or no profits at all. However, joining forces with your friends to form a flipping trust is a different story that might actually work, but you still need to pay attention to special taxation regulations.

Every housing investment requires some additional expenses. They might be one-time costs or operating expenses on a monthly basis. Instead of rushing to make an investment, have a deep insight into its potential, consult experts, get informed on the condition of the market and then make your final decision.

Tags: Apartment, investment property, Real estate, Real estate broker

Category: Real Estate