Investment Tips For Young House Buyers
Blog by Ray Smiley | August 10th, 2014
In the real estate market, there is one group of buyers that real estate agents love because of their ease of getting mortgages for a new house. Yes, I am talking about the young property buyers who are able to get home loans easier because of the years they have in their favor to pay off the mortgage. Here are some smart investment tips for these buyers:
Property investments often take years to break even, before they start generating profits. Often, young buyers fall into the trap of getting into property investments in order to make a quick buck. However, the ups and downs of property investment tend to put many off, leading to them abandoning their investments prematurely.
Always increase your investments gradually
It may be tempting to sell one property in order to buy another which may seem to provide a better return on investment, but it is important to keep increasing your investments steadily as selling too soon may in fact be detrimental in the long run.
Do not rush
Avoid buying too many properties at once especially if you do not have enough money. Always ensure that you have enough to see your purchases through. You can always buy multiple properties at once in the future. It would be a greater dent to your finances in fact, to stretch yourself too thin buying many starter properties.
Diversify your investments
In order to lower risk, diversify the type of properties you invest in. Look for both commercial and industrial properties, and aim to buy in different areas. It is impossible to predict future trends; buying in certain locations that end up being slated for development in the future can actually be a great profit to you. On the other hand, the market is unstable, so cut your risks by investing across a wide variety of properties instead of concentrating on just one kind.
Understand that your own home is an investment as well
All too often, as your income increases, the desire for a bigger and better home increases as well. However, this can lead to impulsive investment in properties that have large bonds to be paid off. This will in fact eat into your capital for further investment and severely dent your income. Keep your home moderate to free up your finances for investment as this will be more beneficial in the long run.
Avoid selling unless it is inevitable
Unless you are facing a financial crisis, try to avoid selling any of your properties. The costs of selling can actually be greater than the cost of retaining properties. Various fees such as agent fees and conveyancer fees, as well as capital gains taxes levied will greatly reduce the amount of money you make from selling your property. If possible, try to hold on to your property and collect rent instead of selling it.
Concentrate on making more income
Instead of worrying about increasing your portfolio constantly, focus on generating more cold hard cash. Many investors who concentrate on increasing their portfolio too early on end up having insufficient funds for further investment in the future. The more rent you can collect, the easier it will be for you to increase your capital in future. Not to mention, market trends may change over time, so it is in fact more prudent to diversify your portfolio not just by location and type, but across time as well.