Choosing to capitalise in Real Estate continues to be one of Malta’s way forward in the realm of investment. Such a property should be about increasing your wealth and safeguarding your financial future. Chances are, you’ll want to earn wealth on real estate based on the risk you are taking, while lessening the amount of time you need to spend attending to the property. In order to accomplish this, you need to make some smart choices upfront when buying investment property. As usual, 77 Great Estates wanted to share a few mindful guidelines to remember when making this financial move.
1. Choose the Right Property at the Right Price
Unlike purchasing shares where the value of a company is transparent, real estate is a tougher nut to crack when trying to price. However, this provides you with the opportunity to obtain an asset below its real market value, if you’re patient and knowledgeable enough. It’s all about capital growth and choosing a property that’s more probable to increase in worth, after all it’s the most significant decision you’ll make, so buying at the right price is crucial.
2. Do the Legwork
The fundamental thing for you is to do your research, or have a reputable estate agent to help you out, so that you can work out what everything is selling for within the area and its surroundings. Eventually, you’ll become very good at working out a property’s worth – and you’ll know a bargain when you see it.
We don’t recommend purchasing property in an area that you’re unfamiliar with. If you do find a property that you like and are unsure of its real value, we suggest getting in touch with 77 Great Estates, so you can arrange a date for viewing and getting a knowledgeable background on the property.
3. Try to Predict your Rental Income
Ensuring that you have a steady rental income stream is also vital because this cash flow will make the holding of the asset more affordable and provide income. Different classes of residential property – home units, houses and land – can outperform each other over time. For example, vacant land will provide no rental income but may appreciate more quickly if purchased in an area with limited supply. Some areas offer higher rental yields, but it’s important that you do your homework as often these properties provide lower capital growth opportunities.
It’s also important that your property suits the demographics of renters in the area. For example, if it’s near the university, more bedrooms will be in greater demand than a big backyard for kids to run around. A family home that’s close to schools and parks on a quiet street will be more sought after than a property on a busy road.
4. Make your Calculations!
Property investment is an established path to profit, though you should consider it a medium to longer span kind of investment, so you’ll want to ensure that you can afford to maintain your loan repayments over the long term. You won’t want to have to sell your investment property until you’re good and ready and if you were to encounter some financial stress, this could force you to offload the property at the wrong time.
Once you own an investment property it can have quite an inexpensive upkeep and loan repayment, since you’ll be earning rent. Remember, that over time, rents tend to increase as does your own income – so expect things to get easier. Make yourself aware of taxes involved in property investing and add these into your calculations. Advice from your accountant is important in this regard, as these can change over time. Things like Stamp Duty, Capital Gains Tax and Land Tax all need to be accounted for. Moreover, interest rates can vary over time but the good news for property investors is that, in times of rising interest rates, one can expect to be able to increase the rent.
5. Understand the market and its dynamics
Ask yourself: what other properties are available in the immediate area? We suggest you to speak to as many locals and our real estate agents as much as you can – they’ll let you know if one side of a street is considered superior to the other. Remember you can also access a lot of information online, and it’s always a good idea to find out what changes may be happening by asking the local council in question. For instance, a major construction next to your property could make it harder to find a tenant at the right price or a by-pass may mean traffic will be reduced and this may increase the value of your property quicker than expected.
There’s this common misconception that property investing always delivers positive returns. While this is true for the most part, it surely isn’t an instantaneous road to riches. You need to understand that how effectively you manage your investment will ultimately govern whether or not this step will help you reach your overall financial goals.
Owning an investment property can be surprisingly manageable, financially. If you need further advice on the necessary steps to take when purchasing investment property in Malta and Gozo, contact 77 Great Estates today! Our Estate Agents are more than willing to help you take this exciting step towards financial stability.
If you found these tips useful, make sure to check out our next blog, where we will be looking at even more practical tips to keep in mind when purchasing an investment property for sale in Malta.