The new year brings with it new opportunities, especially in terms of investments. Now is a great time to re-evaluate your portfolio and identify areas in which you can grow. Property investment is an excellent way to broaden your portfolio, especially if you’re looking for stable, long-term investments.
Property is finite, and in areas such as real estate, it will almost always outpace inflation in terms of growth.
Property investment is one of the most stable investments that an investor can make. In the last hundred years, 90% of the world’s millionaires created their wealth through investing in real estate property.
Property inherently retains its value: it’s a limited resource that grows more limited every year.
Yet with so much up in the air, many may wonder whether properties are still a prudent addition to a portfolio. Still more wonder how they can add property to their portfolio without having to engage in tremendous upfront costs.
Here are five tips for staying focused on your property investment goals in 2020.
Real estate magnates all have one thing in common: They are able to invest in areas before, not after, they become popular. How do they do this? They identify areas in which they know that the population is about to grow. They look at the edges of a city and see which direction it’s moving in.
They invest in areas that are up-and-coming, areas that are speculated to experience future growth.
Even when there’s a national decline, desirable areas may withstand or even buck the trend.
To balance your portfolio, identify areas where infrastructure or transport are being expanded. These industries know what direction cities are moving in before they even begin to do so.
If you know that a city has been steadily expanding to the east, it’s an easy bet that it will continue to do so in the near future. Try to identify trends before they happen, rather than after they’re happening.
Start planning your next move using one of our handy calculators.
Property auctions are one of the best ways to acquire real estate, but there are some caveats. First, you need to be prepared. Make sure you’ve viewed the property, know the budget and have ironed out any legal issues. Once you know what you want, you will need the entirety of the funds at hand once the auction closes.
Property auctions make it possible to get real estate at far below market rate, but the catch is that you need to be able to pay for it immediately. If you’ve already secured cash, it’s a great way to diversify your portfolio and get direct control over real estate.
Rentals are another area of property management and property income entirely, and they need to be carefully protected. Foremost, you need to make sure you have a good rental yield. How much rent can you charge compared to the costs related to the property? In many areas, renters have already been stretched thin, and there’s an upper limit on how much they can be charged. By reducing maintenance and mortgage costs, you can keep a unit profitable. But in some areas, selling could actually be better.
Since real estate is local, the percentage of money you make from rent (your rental yield) will vary substantially based on location. The greater the rental yield, the more profit you will make.
Smart Property Investment has put together a list of suburbs with the highest yields across the country.
Taking out a loan to invest in real property is also a good strategy. Often, you’ll gain many times more profit than you’ll actually pay in any interest. But when you’re taking out an investment loan on a property, consider your loan structure.
Consider whether you have a fixed or variable interest rate, what your interest rate is, how long you have to pay off the loans, and whether there are any other restrictions on the loan.
To avoid issues that can crop up, consult with a finance professional before choosing an investment loan structure. You ideally want a loan structure that has a lower monthly payment than the amount gained through the rental, though you may also want to prioritise paying off the loan as quickly as possible.
Some brokers may be great at managing residential mortgage applications, but they may not have experienced buy-to-let mortgages or other similar commercial mortgages.
Work with mortgage brokers who understand the type of investment that you want completed. Otherwise, they could advise you of the wrong thing, or potentially lead you down the wrong path.
As we enter the new year, the team of Shore Financial can analyse your current financial situation, and bring to you opportunities that you can use to build your wealth.
It can be difficult to identify issues if you aren’t already aware of them. As they say, “You don’t know what you don’t know.” This is where Shore Financial can come in.
With Shore Financial, you can improve your financial status and start building your wealth through property. Contact Shore Financial today to learn more.
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