Earlier this week we compiled a short list of pieces of advice to keep in mind when purchasing an investment property. As promised, we are providing you with an extension of this list, because we care about our past, present and future clientele.
Such a property is a great idea because it’s wholly owned, in good shape and generally cash flow-positive. But as we discussed in our previous post, it’s not as simple as just finding a property and buying it. You need to do some hard work, research, reading up, and eventually make smart, educated decisions to acquire the best real estate investments. Thus, it’s for these reasons that 77 Great Estates wanted to continue sharing its tips with you.
1. Take a long-term view and manage your risks
Understand that property is a long-term investment and you shouldn’t rely on property prices rising immediately. The longer you can afford to commit to a property, the better. As you build up equity, you can then consider purchasing a second investment property – try not to get too greedy and find the right balance between financial stability whilst still being able to enjoy life. Sure, financial security is extremely important, but life is not just about mathematics.
2. Choose a Property that Doesn’t Require a lot of Managing
Some properties just require way too much time and management to make them smart investments. Examples include vacation rentals or low quality properties in bad areas. Nice ‘boring’ and 'safe' properties rented for as long as possible to decent credit profile tenants seem to take the least time to manage. Additionally, treating your tenants fairly and with respect goes a long way towards building a good relationship with them; thus reducing your hassles when there is an issue you need to address.
3. Consider Age, Condition and Property Facilities
Needing to replace the roof or plumbing in the initial months of ownership could make a significant difference to your profits and really curtail your cash flow. It’s therefore advisable to engage an architect’s advice to inspect the building before your purchase, and then once a year, to conduct a thorough inspection of the property to find any potential problems. To fix maintenance problems, it’s also wise to use a qualified workman who is licensed to carry out the necessary works. Furthermore, make sure you’re insured adequately to protect yourself against poor workmanship.
That said, it’s not always a bad idea to purchase a property that isn’t in its topmost condition, because you get the opportunity to improve the value of the property by fixing the place up and this can increase your returns for both capital growth and rental income. Nevetheless, there's a fine line between buying a place that's somewhat of a fixer-upper to one that's completely dilapidated.
4. Make the Property Attractive to Tenants
Opt for neutral tones, keeping the kitchen and bathroom in good condition. You’ll find that you’ll interest better quality tenants if you have a well-presented property and let’s face it, after all the time and effort invested into the property, the last thing you want is a bad tenant.
Another aspect that is potentially subject to debate, is whether you should buy a property you’d be happy to live in yourself. Some believe this will mean it’s appreciated more, while others, on the other hand, simply don’t care. However, it’s important to think about distinguishing between your own home and your investment. This avoids the tendency of becoming overly involved; remember it’s your tenant’s home, not your own.
Also remember that, the day will come when you’ll want to sell the property and if a home is appealing to not only property investors but also owner occupiers, you’ll have a wider market for the property, which in turn, will maximise your selling price. Generally, owner occupiers would be willing to pay a little extra for the right property, because it becomes a more emotional rather than a logical purchasing process.
5. Find a Good Estate Agent and let them to do their job
77 Great Estates boasts of having licenced real estate agents who are professional in their field. Their job is to keep things in order for you and your tenant. We can help you with ongoing advice and help you manage your tenants and get you the best possible value from your property. The estate agent should be able to give you advice on property law, your rights and responsibilities as a landlord, as well as those of the tenant.
While purchasing investment property has its fair share of perks, it’s crucial to understand and acknowledge that a lot of research and work has to be done if you want the process to be as trouble-free as possible. This is why we recommend seeking a professional’s advice prior to starting your quest to invest. Our estate agents at 77 Great Estates are trustworthy and reliable. You’re sure to feel at ease when seeking their expert advice. So, if you’re interested in buying an investment property in Malta or Gozo, contact us today, we’re always happy to help!
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