Many people decide on to buy investment property than in stock simply because they would have more control on the investment. It may be as simple as buying a bigger house than what one’s family needs – with a duplex or a basement that could be rent out – or buying a whole new property that could be improved and added to the value of the property. This is especially true when people think that they would be able to do the repairs on the house. If you were able to rent out your property, it would be like free money. You would be paying the mortgage of the house using the tenant’s money.
You also have to consider that you can act as the landlord of the property and hope that the tenant stays as long as possible. You should be able to enforce the rules and make sure that you are able to do the repairs needed in the investment property. If you think you do not like the responsibility of being a property owner, you can avail of the services of a rental agency, but this will cut into your profit.
When getting your property investment, you should take into account the intrinsic value of the property, not its price. When the price of the property dips below 80% of the intrinsic value, it is considered a good buy. This gives you a safety margin and will allow the price of the property to lose 20% until there is a real loss in your investment.
If one finds an investment property that is in need of repair, calculate the expense of the repair versus the purchase price. When the purchase price is double than the repair cost, it is considered a good buy. When the house is repaired to a new state, it will double the value of the house.
You also want to make sure that there is something in the property that you can improve so that you yourself increase the value of the investment and not rely on appreciation. Do not hope that the value goes up; you have to make it go up.
When investing in stock, the only planning available to most is to pick a good company to co-own. But in doing property investing, there are a lot of ways that you could increase the value of the house, get the best mortgages available, perhaps even refinance investment properties you own, and double your money as soon as possible.
