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Real estate investing is something that I have started tilting my portfolio towards as I find it a great way to generate positive cash flow and take advantage of tax breaks.
Most physicians have very limited experience with real estate (apart from buying and selling my homes my prior knowledge classified me as a true real estate neophyte).
When Allen Walker contacted me proposing some real estate investing tips I was intrigued and agreed to putting it on this website.
[Disclaimer: Allen and I have no financial relationship]
Ever had dreams of building a property portfolio but hesitated because you already have your own business to run and lack the time to?
It can seem really hard to take advantage of all the great opportunities regarding property investment, especially while you are already busy with managing your day-to-day business responsibilities.
However this additional effort can provide some large benefits, such as additional income which could be deployed to drive even more growth of your business.
Property investments bring you additional cash flow, carry tax advantages, and even allow you to pledge your property as collateral if you need to borrow cash for your business.
However you need to be cautious with any investment.
This requires you to be well-versed with the various property investments strategies available before putting your hard-earned money on the line.
Here are some tips that will be helpful for you to make the right choices at the right time when investing in properties.
1. Know The Objectives
Different kinds of property can benefit different types of investors.
It is therefore vital to match the property with the appropriate investor type.
For example, you may be solely interested in having capital growth of the property.
Conversely you might simply be interested in generating additional income and any capital appreciation would be a bonus.
Business owners with tight cash flow would therefore be interested in cash-generating properties that have high rental yield.
Inner-city apartments make good example of such properties.
If you don’t have any issues with the cash flow, targeting properties with projected high capital growth may be the right choice for you.
This goal can be achieved with properties that typically have a bigger land component.
These types of properties may initially cost more compared to apartments.
These properties may even have a low rental yield, but make up for it with potential greater capital growth in the long run.
2. Value Your Time
Business entrepreneurship requires a lot of time.
If you are passionate about renovations then you might be interested in buying a ‘fixer-upper’ for increasing your capital growth.
Otherwise it may be more prudent to buy a property that requires less involvement on your part.
Hiring professionals to inspect properties thoroughly will highlight any major maintenance issues that can be easily overlooked by the novice investor, such as rewiring requirements or even rotting in floorboards which cannot be ignored.
Hiring property managers for rental properties is also a good idea because they can collect rent, do some bookkeeping, and be your property inspector all at the same time while freeing up your schedule.
3. Avail Full Benefits
Owner-occupiers are often entitled to exemption from the capital gains tax at the time of selling the property.
In addition, it’s also easier for you to qualify for a mortgage if you plan to live in the investment property.
There are many strategies for maximizing tax benefits, most notably using depreciation, interest charges, and maintenance costs to offset any money the property currently generates.
4. Choose The Right Time
Property valuation can often see shocks and dips.
While historically good properties can bounce back, you’d only be able to benefit from them if the asset is held for a longer term.
Being a successful property investor often requires being bold and resisting the urge to have a panic sale during these downturns.
When you are able to time it well according to the market, a day will come when you’ll start enjoying a bigger equity cushion.
It will give you the flexibility and freedom you need.
5. Research Well
The best property investments result from well-informed choices.
You have lots of resources available nowadays to carry out property research effectively.
This will also have the added benefit of putting you in a better position for negotiation.
You can rely on online services to get insights into the sales history of the property in question along with information on similar surrounding properties and selling prices.
Find out if the median price for properties in that suburb is rising, falling or just flat lining.
See how the area responded to downturns like financial crisis historically.
If you are planning on renting the property out then you should consider factors affecting tenant demand.
For example, if the locality has excessive supply of rentals, filling your residential units in that area would be harder.
Also, do some digging into the running costs as well.
You must know the local tax rates, management & rental fees, and any potential body corporate fees as well.
So, if you’re a business owner planning to invest in properties, these tips are surely going to help you regardless of your investment motives.
Follow them precisely and see how things turn up.
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