subject: How to Purchase an Investment Property [print this page] How to Purchase an Investment Property How to Purchase an Investment Property
Investment property is an old age money making formula, which despite the economic downturn of the previous years is seeing a comeback in the future. The past few years have seen a lot of people investing in properties, which are slowly beginning to yield results in terms of income. However, if you have not yet invested in any kind of real estate, you need not fear as you can do so now, provided you follow the following principles or rules of purchasing investment property.
Firstly, it is important to understand that where the property is for mere investment, chances of paying more than required for the property is possible. In order to avoid such higher payments for property, it is important to develop a network, which will help you understand the market and ensure that you pay the right price. An ideal network is one that comprises of builders, realtors, attorneys, other investors and local real estate professionals. These are people well versed in the field of investment property and can guide you in making the perfect investment.
In addition to creating a network of useful contacts, it is important to study and understand the property market. Study the trends over the past years as well as the current and predicted trends before actually finalizing or thinking about any investment property. In addition, you should also be aware of the various policies announced by the government for purchasing such properties. It is pertinent to note that all such trends or policies are dependent on the location as well as the type of investment property you want to purchase. The development, presence or lack of it, will affect the actual value of the property, in addition to the possibility of future development, if any. Therefore, these factors should be considered before finalizing any property for investment purposes.
Personal finances are the next most important step to be considered before investing in real estate properties. It is imperative that you are sure of the kind of money required as well as the amount in hand or available at short notice, before you finalize a property. Approaching a bank or financial institution for a mortgage approval in principle will help in paving a smooth way for purchasing any investment property.
Taxation policies for properties in a particular area along with the need for repair or renovation of the property in question should be considered before purchasing any property. It is important to understand that taxation policies will ultimately affect the returns from the property, which could either be positive or negative. Moreover, if a property is high maintenance prone or requires major repairs at regular intervals, then it is definitely not worth investing as the cost of maintenance will exceed the income accrued, resulting in negative cash flow. Therefore, all these factors should be considered before signing on the dotted line.
Lastly, maintenance of the property should be considered before investing in such properties. Even low maintenance property requires someone to be in constant touch with the tenants to ensure that there is no problem incurred. You can either handle maintenance issues on your own, if you have the time and inclination to do so, or can hand it over to a property management company for a certain fee. The cost of the fee should be considered as expenditure while calculating the final cash flow.
Once all these factors are decided, then it is important to ensure that the property papers are drawn by a legal attorney and that all factors are properly recorded in the agreement. Also make sure that you read properly before signing the agreement.
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