Which Property Investing Strategy is Right for You?

Which Property Investing Strategy is Right for You?

Property investing can be a great way to grow your savings. Many people like property investing because of the tangible assets (a house, a flat, a commercial property). When you buy a stock or a bond, on the other hand, you might not even get so much as a piece of paper to hold on to. Your investment will consist of 1′s and 0′s in a broker’s database, and your return on investment will be subject to all the complex and sometimes mysterious forces that govern the market.

Of course, property investments are also subject to market forces, specifically the factors that affect housing values. Yet somehow, your investment seems more secure when you can hop in your car and drive past it any time you like. Property investments also allow you to create wealth on your own by improving the property. Again, this feels so much better than passively holding stock and hoping the price will go up!

Before you make your first property investment, you need to decide what your property investment strategy will be: resale or rentals.

Which Property Investing Strategy is Right for You?

Resale

Buying a property, fixing it up a little, and then reselling it is a good strategy for a strong market. Ideally, you can purchase undervalued properties with significant cosmetic problems at low prices. Bank-owned properties are good candidates, as are properties owned by motivated sellers like a deceased person’s relatives or families that need to relocate quickly. You can take these ugly ducklings of the housing market, fancy them up, and resell them at a profit.

When considering buying a property for resale, evaluate the strength of the local market. If the local economy is growing, jobs are being created, and people are moving to the area, you have a good chance of selling the property quickly. If the local economy is struggling, on the other hand, you might have to wait a long time to find a buyer. If you have doubts about the local market, ensure you are financially prepared to hold the property for a long time.

Rentals

Buying a property and renting it out is a popular strategy for people who want a steady income stream. Once the property is paid off, your rental income is pure profit. Some people even use rental properties to help them build their portfolio of investment properties by purchasing several houses and then letting the tenants’ rent pay the mortgages for them.

Renting out properties can also be used as a temporary strategy to help you wait out a downturn in the housing market. That way, your property won’t just sit empty while you wait for prices to improve enough to justify selling.

The main drawback of rental properties is that there are a lot of administrative costs. Unless you have time to show the property to potential tenants, review rental applications, and deal with emergency repairs at all hours, you will probably have to hire a property management service. This service will take a cut of the rent and lower your profits.

Before making repairs and renovations to any property, decide which strategy is best for you! You only need to make the property clean and serviceable if you plan to rent. However, if you want to sell, you should invest in nicer materials for your renovations.