Asians generally like to own physical properties and many end up being property investors. Here are 10 property investing tips from property gurus to succeed in property investments.
1. Know Your Target and End Goal
Are you buying your property to flip or to rent out for income? Knowing your goal is very important as it determines the type of properties you would be buying. Most flippers will buy from developers to earn the difference between developer price and completed price. For rental properties, subsale properties with existing tenants are a much better bet.
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2. Shop Around For The Best Loan Rates
These days the banks are extremely competitive for business so don’t be afraid to ask all of the banks what they think and the best rates they are willing to offer. While the difference in interest rates may not seem much, the values add up to become significant over time.
3. Build a Team of Professionals
Property investing is not a solo game, you will need the help of various professionals. A good lawyer will ensure that your transaction goes smoothly and protect your legal interests. A hard working and knowledgeable agent not only helps you to look for good properties to buy, but also help you to find suitable tenants and negotiate for the best values.
4. Use Rental Yield to Determine Valuation
Rental yields are one of the best ways to determine valuation for a property. Always set a target rental yield before hunting for properties and stick to your goal. A higher rental yield indicates a more attractive price. Use the average rental per square foot of units in the area to calculate your potential rental.
5. Don’t Fall In Love With Your Properties
Just like any other investments, you should not hesitate to let go of your property if it is performing poorly. Be objective when you are searching for investment properties and not get drawn in by factors such as nice decoration. You won’t be staying there anyway,so no point paying higher premiums because you personally like the property. Always rely on valuation figures when negotiating.
6. Be Selective With Your Tenants
Check to make sure your tenant has a proper job or source of income so they are less likely to have problems paying for rental. If possible, interview your tenants to get a sense of their character, whether they are the ones who are likely to be good pay masters and take good care of your property. Having a good tenant saves you a lot of headaches down the road.
7. Location, Location, Location
It is best to do thorough research in the neighborhood before investing. Get to know the profile of the population and the likely target tenant. Close proximity to public transport such as train station is a big plus. Nearby schools will be important to tenants with children as well.
8. Maintain Your Properties
Properties do age over time and suffer from wear and tear. To ensure that they continue to fetch good prices in the market, maintenance is a must. Having a team of trust worthy contractors, plumbers and electricians will make it much easier to maintain the properties. They should also be able to solve maintenance problems faced by your tenants with minimal involvement from you.
9. Aim For Positive Cash Flow
Cash flow is the name of the game when it comes to property investing. You should calculate if the rental income from the property is able to pay for all the property related expenses. Having extra cash flow is critical to being able to invest in more properties later.
10. Keep Leverage In Check
Do not be greedy and end up taking more loans than you can afford. Make sure you are able to afford at least 6 months of the installment payments just in case it takes too long to find a tenant. If you are not able to maintain the property, you may be forced to sell in less than ideal conditions.
About the Author
Calvin Yeo is the Managing Director of Doctor Wealth Pte Ltd (www.drwealth.com), which is an online financial planning platform. He is also a Chartered Financial Analyst (CFA) as well as Certified Financial Planner (CFP).
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