An investment property can make you a lot of money, and it can also break you financially. The only way to make money by investing in real estate is to do your research. Another important factor is to know your own financial position, where you stand money wise and what your financial goals are for the future. Only you can know where you want to be, just as only you can make the best decisions in real estate investment.
Investment properties are often the holy grail for people of all walks of life - but I'm always amazed at how people settle for one or maybe two. Why stop there? Depending on your investment strategy, there's no reason why you can't keep accumulating properties at an ever increasing rate. This works both thanks to capital growth and the increasing equity you hold in the properties you already own.
That's another story though, let's focus on choosing just one investment property.
The main thing to remember is that buying an investment property is a business decision, which should not involve any emotional input. All that matters is the numbers. This is especially important because there are really great investment deals out there that are passed over just because of emotional reasons. What I mean is that the house might be in a bad area, or the neighbours weren't very friendly during the inspection, or the light fittings hadn't been polished recently – you know, things that are important for your own home, but not for your business venture. It's important to remember this because your investment property is a business – it's designed to make you money and that's that.
You must be aware of the financial ins and out of the purchase of the property. No real estate mogul ever conquered the industry by not being an information hog. Know as much as possible about the house, the neighbourhood, the town, the city, and tax implications – everything! This is what business people do – they make it their business to know about their business. It's the same for your little investment property. If you're going to make emotional decisions and ignore really important things like tax implications of your investment purchase, then you should probably not buy the property.
A great investment property is found in your financial statements. Know what you can afford in repayments on the mortgage. Know what you can afford to borrow to purchase the property. Know what sort of rental return you can expect in the area for the sort of house you're purchasing. Most of all, have a plan for when things go wrong – and they might. A great investment (and it doesn't matter if it's real estate or not) has a number of protections around it, a kind of buffer in case things go wrong – it's basic risk management. Real estate is fun, and if you work it smart, it can also be hugely profitable.