As investing in real estate becomes easier and easier, new property investors are buying before they have even had a chance to think. To gain a good return on investment you need to make smart choices to minimise your risks while maximising your gains.
Here are four things all smart real estate investors look for when deciding whether a property is suitable for their portfolio.
1. Pick investments that don’t seem too risky
Going with the high-risk high-reward strategy is one that should not be adhered to when investing in real estate. You only need to make one bad investment before your whole life crumbles before you.
Smart investors will pick properties that have very little risk. The whole point of investing in real estate is because it’s a much safer option compared to trading or setting up a business.
Properties that need to be renovated or are located in undesirable areas are properties that come with greater risks. The property may be $30,000- $50,000 undervalue and looks like a great deal, but have you considered all the risks associated with it? Can you take on a project of this size?
2. Locate properties that are easy to manage
Some properties require constant attention and take a hell of a lot of effort to manage. This usually apply to properties that are rented out as holiday units, to college students or in areas of low tenancy. While these may sound more fun and interesting, there is a lot of work that goes into managing them.
Smart investors like boring properties which need next to no work that are ideal for families or working professionals. These kinds of tenants are usually much easier to handle and occupy the property long-term, meaning you aren’t constantly forced to find new tenants, clean up and write new contracts.
3. Use the 2% rule
In property investing, the 2% rule states that the monthly rent of an investment property should be 2% of the total purchase price. So a $200,000 investment property should be yielding around $4,000 per month in rent.
This will depend on which area of Queensland you invest in. In some areas you will find it hard to achieve, while others will surpass it. The savvy real estate investor will use this as a basic guideline to see whether a property is worth taking a deeper look at or not.
Don’t look at the property because you love the living room and garden, only dig deeper if it will provide you with a decent return on investment.
4. Seek professional advice
There are many aspects of property investing that even the savviest of property investors needs advice on. Finding a reputable Realtor in the local area can provide you with valuable data and advice that could end up saving you thousands.
If you’re looking to invest in the Queensland area but are not sure where to start or what to even look for, feel free to get in touch. We have a huge database of properties and our expert Realtors can help you identity your investment goals and find a suitable property for your needs.