Buying investment property can be looked at from many perspectives. With the fashion of “flipping” houses, it’s difficult to know if the market is saturated with homes for sale. However, a deeper investigation will tell you whether it’s worth buying investment property.
There are several business models that work for investment property. One is to buy at current cheap prices and hope that the market will improve. Another is to buy at rock bottom prices, renovate and sell on and the third way is buying investment property to rent it to help income flow.
Buying And Holding Property
This is only worthwhile if you see something which comes up for sale at a really knock down price. The reason that some homes do come up for sale in this way is that the owners have failed to pay off their mortgage. The home is repossessed and sold cheaply by the loan company because all they want to do is get back what is owed.
There are several disadvantages of buying a property, which is merely going to be left to sit. One is that the house will cost utility bills and housing taxes as well as insurance. Any reckoning of the viability of the investment should take into account all costs over the entire period of ownership.
Buying Investment Property To Renovate
If a home is in bad repair and you make expensive improvements these alone won’t guarantee that you will get your money back. It could potentially be a very rewarding investment. However, there are items to bear in mind when deciding. For example, what is the scope of repairs needed? What is the market that homes in that particular area is aimed toward? Is there a regular market and what is the competition?
If, for example, you buy a house you think you could make into great family accommodation and the market in that particular area is geared toward professional business people, you may be wasting your money. If there is a glut of housing available cheaply within the area of the home that interests you, similarly, there may be too much competition. All of this has to be weighed up when making the decision about buying investment property.
The amount you can gain from buying investment property for rental depends upon the amount of rent you feel you can earn from that property. This must take into account taxes, insurances and repairs of the property. People who purchase small blocks of apartments, for example, may be able to minimize expenditure. All of the properties are under one roof, repairs at the outset offset the possibility of future costs, and the apartment block may actually be in a very upwardly mobile area suited to executives.
It really depends upon what market you are aiming for and whether you can produce cost effective accommodation for others which will not remain empty for any length of time.
Thus, the question of whether to spend money on buying investment property really comes down to expertise in marketing that property, either for rental or for sale, to the right market at the right time.