Investment Property
Investment Property
Your Investment Property
Buying Investment Property is a great long term wealth strategy. I am often surprised by people who have the financial ability to use property as a wealth strategy but don’t because they are too worried about tenants wrecking the property or just too scared in general because of the negative press they hear.
There is a saying that if you have a good experience you tell 3 people but if you have a bad experience you tell 9. So it is no wonder that people hear more bad stories about Investment Property then good. In my experience like everything it is not what happens but how you deal with it that counts. In my Property Investment career I have had negative experiences however it is relatively easy to find solutions quickly and end up better off.
‘Time to Money’ ratio
When I look at the amount of time I have put into Investment Property compared to the money it has made and will make, the time to money ratio is astounding.?I have been buying property since 1994. So over the last 15 years I have made approx $700/ hour. The time spent includes looking for Investment Property, buying it, doing it up (if needed), finding a management agency and dealing with things when they call me. If I keep all my property and buy no more, continue renting it out through an agency, and only spend time on it when the agencies call, and the values goes up 7% a year (conservative) then over the next 10 years I will make approx $3000/hour.?Can you make this kind of money in your job? Once you have an Investment Property that is managed by an agency, you would be lucky to spend 10 hours a year on it. Property investing is therefore an excellent way to trade time for money.
What to consider when buying an Investment Property
1. Does the rent cover the majority of the mortgage repayment?
2. Can I do it up or increase the value in the future via splitting the block, or building apartments etc?
3. Is this an area that people will want to live in the future?
4. Is there more then one reason why people will live there (industry, environment)?
5. Usual things like close to transport and schools/college
Things people fear
A. Tenants not paying
I always use an agency now as they can find better quality tenants faster for my Investment Property. The only time I had tenants not pay the rent and had to ask them to leave was when I found them myself. If your tenants lose their job or some other circumstance occurs then go and see them or phone them. Listen very carefully to what they say. Tell them you understand and feel for them. Explain that you can not afford your mortgage without rent and know that they would understand that if they can’t pay they will have to move out. The agency should be able to find them a cheaper place and you could ask if they could move in with friends or try house sitting. In most cases they just want to know that someone cares enough to talk to them and understands what they are going through.
B. Tenants doing damage
Make sure you have insurance on your Investment Property that covers accidental and malicious damage. Otherwise the best thing to do is just forget about it. There is nothing you can do once the damage is done except repair it. Again using an agency will be the best protection against this. I have never had any problems. Again this is fairly rare, however the stories from some Property Investors create an image in your head so property investing appears a greater problem then it is.
C. Problem Agency
I did have an agency once that did not pay me for 6 months even though the tenants were paying rent on my Investment Property. They kept saying they would pay me but nothing turned up. So I filed a claim against them in the small claims court online. I had my 6 months rent within a week. This is very rare and I have never heard of anyone else having this problem. So regardless of what happens just take action.
D. Floods/Fire/etc
Make sure you have insurance that covers your Investment Property.
The chances of any of these things happening are slim and easy to deal with anyway. The financial rewards compared to the time invested in buying and looking after an property are a fantastic reason to Invest. So what is stopping you from buying a property for Investment?
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