If you are eager to make your money work more aggressively for you and you are keen to play a more proactive role in your investment portfolio, you need to take a look at the world of real estate. Back in the noughties, this was the go to sector to make a quick buck. While the heady days of the property market back then are long gone, you can still use your financial acumen to turn a profit by flipping houses. Don’t assume that you can buy any house on any street and see lucrative returns on your investment. There are three golden rules that you need to follow as an amateur real estate investor.
- The Numbers Need To Add Up
Just because you head to a property auction and spy a property that looks ridiculously cheap that you can afford doesn’t mean you should part with your cash. If it appears too good to be true, the chances are that it is. Cheap properties are renowned for having some hidden nasties in their legal packs. Perhaps there is a covenant on the land making development impossible. Maybe the pad is unmortgageable because it is not of standard construction. Or maybe it floods every year so insurance is not possible.
You need to consider making the numbers stack up. Ensure that the purchase price of the pad plus the renovation costs and any taxes and fees does not overtake the resale value of your dwelling. As a rule of thumb, you should be aiming to make at least twenty per cent profit on every flip you make. Study the careers of real estate gurus like Brent Edward Lovett who have spent their lives on design projects and understand the nuances of the industry.
- Go For The Worst House On The Best Street
To make the most profit, you need to be able to add value to a pad. There’s no point in buying an excellent property that has been well maintained in a desirable area as there’s nowhere to go with this. You will have bought it at the ceiling price. Instead, you need to focus on that desirable area but opt for the property that needs updating. Consider choosing a location that you are familiar with that has excellent schools, low crime rates and great transport links. Avoid the ‘up and coming’ areas that may show little sign of improving and go with the tried and tested regions. Purchase well, do up a pad within budget, and sell quickly.
- Don’t Overstretch
Many people choose to take out home loans that stretch them financially. This turns a low risk investment into a high risk one. If you have a family and other financial responsibilities, don’t overstretch yourself and stick well within your monetary means. Should an investment fail, you don’t want to be at risk of descending into debt or money problems. Do one project at a time and have fun with the real estate dream.
Being a property investor, renovator, or builder takes experience and a certain skill set. Explore the world of real estate and consider turning your investment dreams into a reality.