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Property Investment: What You Need To Know

We all want to ensure a certain degree of financial stability for ourselves in the future, and property investment is an increasingly popular method for doing this. People who are intimidated by the fluctuations and risk of the stock market often take to property as a much more stable vessel for growing their wealth. Whether you’re planning to flip a home or purchase a multiunit property for rental, here are a few things all newcomers should know about property investment…

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You’ll Need to Cover Some Big Down Payments

There’s no mortgage insurance for investment properties, so you’ll need to come up with a 20% down payment to secure traditional financing. Putting even more down initially can result in a much better rate in many cases. Furthermore, loan costs are higher for your average investment property.

You Need to Know What Drives the Market

Although the real estate market is a little more stable and slow-moving than many other methods of investment, it’s still in a constant state of change. If you want to maximize the profits you draw from your property investment, you’ll need to have some understanding of the factors that influence the market. The economy, location and the community, along with interest rates, demand, and government subsidies can all have a tremendous effect on the price of housing.

You’ll Need to Be Handy

Flipping a home and being a landlord both mean that you’ll need to be fairly good with DIY and fixing common issues around a property. Whenever you’re planning to invest in a property, you need to make sure you have a decent cash cushion to hand, that will cover unexpected repairs between the purchase and when those first rent cheques make it into your account.

Your Income Will Vary

While it’s possible to do a little forecasting, your income from property investment is always going to fluctuate. Tenants will come and go fairly often, and it may take some time to find a new one for a recently vacated unit, especially if the place is in need of some TLC. In the meantime, you’ll still need to keep on top of taxes, the mortgage, and insurance.

You Should Start Small

Fixing up a slightly run-down property can be a challenge, but it’s always better than buying a property that’s too large for you to handle. It’s best to start small, purchasing a single apartment, duplex or condo. Owning and managing this kind of property will help you get more settled in the idea of real estate investment, and allow you to decide whether or not it’s the right move for you.

Fixer-Uppers Can Be a Trap

If you have the skills and resources for a large-scale improvement, or know someone who can for a low price, then fixer-uppers can be an absolute goldmine for real estate investors. However, it’s a big mistake to buy a fixer-upper if you’re not prepared for it. Many newbie investors make this mistake, and wind up paying way too much to spruce up the property, and in turn, making a loss.