10 Things Every Property Investor Needs To Know

By on March 11, 2013

Unlike Mathematics, there is no absolute correct answers to property investments. If things can be broken down to such detail, every degree holder will be a real estate magnate. There are however, rules of property investing that investors keep in mind. These could serve as guidance or a timely reminder to keep investments as pragmatic as possible. Other than the 2 prime directives of cash flow being king and that we can never time the markets to an exact moment, here are 10 of the most critical rules.

1) Capital is required for investments. There is no investment that requires no money. Even hitting the lottery requires you to buy a ticket. You might find advertisements all over the place talking about investing with no money down. This does not mean that you don’t have to dig into your bank account, it just means you do not have to do that up front. If you want to make money with properties, be prepared to spend money.

2) Using leverage and other people’s money. If you are to go at it alone, you will not be able to even get past the front door of most investment opportunities. When you first get started, you might only think about going to a bank to get access to finances. But once you start buying more and have your eyes on big properties, partners with cash will show up for you to consider.

It’s my money. I followed rule #1.

3) You are not an island. Property investments tie up a whole host of professionals. These include, property agents, lawyers, accountants, mortgage brokers, valuers, lenders, etc. You have to build relationships with all of them to expand your network. Credible access to these networks also means that you can get the best advice in the most timely manner on investment opportunities.

4) Depreciation. Depreciation is an accounting rule that writes off paper losses against your income. This term has gain a lot of publicity in recent years. But property investors have known of this for ages. Check with your accountant on the specifics if you have to.

5) Best leave industrial and commercial properties alone when you are new. There can be many practices and rules around owning and managing industrial and commercial properties that are beyond your scope of comprehension. If you are new to property investments, it could serve you well to leave these properties alone. If you really have to get in on such properties, it is best to get an experienced partner on your first commercial investment.

6) Buy your properties in places you know. It makes absolutely no sense to write your cheques for properties so far away and which you will never see. Unless you run a multi-billion dollar property empire with offices all over the world with trustworthy people working for you, you should only buy properties in places that you know. In this way, you will have better knowledge of the area you are buying in and will also be able to manage it better.

7) Be an active manager. You could be thinking about sitting on a beach bench with a laptop on paradise island everyday while the cheques continue to bulge your bank account. That is just a scene from the movies. Take a hands-on approach in managing your properties to learn the trade better. This allow you to react fast to problems and better delegate work to your employees.

8) Strong leases. Most of the time, you will only learn about how important your lease really is until you run into problems with tenants. Leases are your assets. It can not only protect your investments, but also serve as an indication of your property value if a time comes for you to sell it. Get a good reputable lawyer to draft your leasing agreements and seal them in a safe for added measure.

9) Taxes. Tax planning is always critical to organizations that mean business. Depreciation which was mentioned previously has to do with tax matters. As different territories have different tax practices and laws, it is best that you check with your accountant on how to plan your tax properly. The point is that tax planning is something your should not overlook in property investments.

10) You are responsible for your own success. A lot of people are petrified to make decisions to invest because of uncertainty. You must get out of this box if you want to be a successful investor. Don’t blame your spouse for not giving emotional support or the government for putting up regulations on investments, A lot of times, the best investments are those that was contrary to what everyone else think. You have to make your own judgements based on information and opportunities.



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