Profitable property investment almost always requires a well-thought-out plan. There are already too many unpredictable issues associated with the investment process, so minimizing risks beforehand it highly recommended. The best property investment strategies start with determining investment goals, type of investment, the right person to help, ownership structure and ROI formula, according to Chris Porter at RealtyBizNews.
- Clearly define investment goals
- Decide on a geographical area and specific market to target
- Carry out basic rental income return on investment analysis
- Seek help from experts
- Consider variables involved in ownership structure
The first step is to clearly define your investment goals. Are you investing to generate regular income, save for retirement or build wealth? Once you have your goals set, it’s time to start determining which type of property investment you want to pursue.
To begin narrowing your options, think of a geographical area you want to invest in and a market you would like to target, Porter writes. Afterwards, its best to conduct a basic rental income return analysis. The analysis will require you to determine purchase price, management and maintenance, expected rental income and cost of mortgage payments.
For those who aren’t property investment professionals, Porter recommends seeking expert help. “As you grow your investment portfolio, you will realize that having an experiences property investment team is crucial. Make sure you trust those experts and include permanent players like an accountant, lawyer, and home insurance specialist,” he writes.
Determining your ownership structure is also an important part of planning your property investment. This involves considering factors such as flexibility, taxation, simplicity, growth of your investment portfolio and exit strategy.
For rental income and investment yields, analyzing the property investment is a little more complicated. In these cases, a property generates regular income but no capital growth, meaning you won’t be able to use your rental income as your rental yield or ROI.
Porter explains: “Experts assert that you have to measure the returns from your rental income to returns from returns other classes of assets could offer you. This calculation helps you determine if property investment is the right idea. Ensure that the property selected has a potentially high capital growth.”
Finally, it’s valuable to revisit your initial goals and ensure your investment plan is in line with them. Throughout the process, be sure to stay aware of your tenants’ profile, leverage your investment, and define an exit strategy, Porter concludes.