Property is not only one of the most popular but one of the more stable investment vehicles that you can purchase. While you might not see parabolic gains, you can expect steady increases in value over the long term which is why it is such a popular option among the majority of the population.
That being said, since investments can range from simply vacant land to a more elaborate steel framed house construction, your best investment will vary depending on goals and individual situations. In this blog we will be looking at the different types of property available and what could be best for your needs.
Identify Your Investment Goals Before Your Search
Before making any important decision or investment it’s imperative to identify your goals and plan appropriately as those who jump into investments without due diligence often fail. The vehicles in the property market vary greatly and can involve anything from simple capital gains in your place of residence to more elaborate rental structures. Your investment goals will dictate the type of property you should be looking for as well as the location and financing options.
We recommend spending some time writing down your goals and discussing this with any partners or business associates. This can and should involve listing what investing goals you wish to achieve in one year, five years and ten years, as longer timelines will give you an accurate picture of your future financial outlook. Taking the time to look at your investment goals and matching them with the right property will help set you up for success in the property market.
Research Risks and Rewards of Each Property
Now that you’ve got an accurate picture of your goals it’s crucial to gather information on the various types of properties available in the market and evaluate them based on these investment goals. If you want to accrue higher portfolio gains in a shorter period of time then you might be looking at short-term flipping at higher-return higher-risk locations. This strategy and risk profile will be very different to someone looking to preserve wealth over a 10-20 year time frame so taking the time to understand risks will help you make informed investment decisions for your portfolio.
Consider Rental Investments for Cash-Flow
One quite common path for those building their portfolios is to start renting out their properties and it’s no wonder this is one of the most popular options as passive income and tax benefits can be a major advantage. While being a landlord may not be for everyone, those who are ready to put in the work managing the property and tenants can do quite well. These investment options will be suitable for those who have some additional time to manage the properties and want to invest over a time frame of over five years at least.
Generally, those who start will either manage the rental themselves or get an agency to do everything from putting the property on the market to communicating with tenants. Keep in mind though that the property managers will cost so it might take from your overall profits. There are also other options to consider such as short-term rentals like Airbnb that can be potentially very lucrative if in the right locations.
Look at Vacant Land for Capital Appreciation
While all properties will appreciate if you’ve found the right locations and purchased at the right time, many simply purchase vacant land and wait for the value to increase over time when an area begins to develop. These do not deliver immediate returns or will give you consistent cash flow but might be able to give you considerable gains over time. Especially because finding undeveloped land is becoming increasingly difficult as worldwide development increases. With planning and research, those who purchase in the right areas will be poised for future gains.
Flipping Houses as a Short-Term Investment
Flipping houses is a popular way that many investors to make faster gains but it is much more time-consuming and involved than other methods. You will need to have some construction knowledge and a willingness to get your hands dirty but it can pay off in a short amount of time. Before jumping to properties it’s essential to do your research and understand the renovation costs as well as the local market so you can ensure you’ll make a profit on the flip.
If the numbers add up, flipping houses could be very lucrative as long as you have a solid plan and understanding of the real estate market before purchasing.
Real estate investment can be a lucrative venture for those that are savvy and armed with the right knowledge and understanding of goals and current markets. Taking time to determine which options are best for you is certainly worthwhile for big financial commitments such as property.