For all intents and purposes, the theory behind property investment is fairly simple. You purchase a piece of real estate for an affordable, even undervalued, price in an area where both demand and values are set to increase and rent it out to generate an income. After holding it for a period of time, you go on to sell the property for more than you bought it for, making yourself a tidy profit.
While numerous other more complex issues can come into play, very generally this is ideally how investing in property should work. Having said this, the legions of people who have made poor investment decisions losing considerable sums of money can attest to the fact that there are many opportunities for the process to go wrong.
So how can investors avoid the pitfalls of property investment? Essentially it comes down to being smart with your purchases, avoiding borrowing too much and doing as much research as possible about the state of the market and where to buy.
Most properties ideal for investor purposes will be affordable in the first instance, but also set to grow in value over time, so that they can eventually be sold and gains made. For such value growth to be achieved, a property will most likely be located in an area that is also set to increase in value, which could be for a variety of reasons such as:
- Expected, sustained population growth
- Planned government investment in infrastructure and transportation
- A local economy that is set to boom
Factors like these and others will see the demand for homes in an area increase, usually driving up both property values and rental rates.
An area's rental vacancy levels are another important consideration for investors. While it is obviously ideal to secure an affordable property, you won't be able to generate an income unless there is rental demand in the area. And the lower the vacancy rate is, the stronger the upwards pressure on rents will be.
With careful research and planning, investors should be well placed to secure a property that consistently generates a pleasing income and can eventually be sold for profit. Remember that property investing isn't generally a 'get rich quick' scheme, rather the most capital growth will usually occur when properties are held over extended periods.
For more information regarding attractive investment opportunities around the country, please drop into your nearest CENTURY 21 office to talk to a real estate professional.