When investing in property, one of the key success factors is to make sure you find yourself a good property.
Bad property investments could hurt your wealth building plan, while good property could very well make your retirement years a paradise.
While investing, it is advisable to take your time scouting the property before you buy it.
The more you learn about a property, the better informed you are about its overall value.
So what should you check out?
Here’s a brief list of things you should check out:
- The past growth record of the area
- Are there any structural or pest problems?
- Rental yield and potential for future growth
- Demand for rental properties in the area
- Any new infrastructure projects locally?
- Any good schools locally?
- Public transport nearby?
- Convenience shops or shopping malls nearby?
- Access to major roads?
- Crime rate of the area.
To debunk any misconceptions, a bad property does not necessarily mean a decrepit home.
On the contrary, the property could be one of the very best modern houses and still qualifies to be bad property.
A bad property is one that maybe, due to reasons such as the neighborhood, has a depreciating market value over time. It may just be in a high crime area.
What this means for your retirement
Every individual who invests in property has the future in mind. For most, that future involves using the property to get great retirement benefits. However, a bad property could very easily ruin that future.
Let’s take for instance two people who make an investment in property, Jim and Peter. Jim chooses a great rental property in a great neighborhood with high value housing, low crime rates, great amenities and low tax rates.
Peter, on the other hand, chooses to invest in a well-built rental property with a not-so-good neighborhood that is neglected, has a high crime rate and has no good local schools.
In 20 years, they both retire and aside from their pension, they have their property investments to generate rental income for them. Jim has increased its rental value over the twenty years, has very low rates of tenant turnover rates, enjoys high personal income tax benefits and has tripled its sale value.
Over the years, Jim’s house has aged but due to good maintenance from both the tenants and management, the house does not require too much in renovation and repairs.
Peter on the other hand has had a high rate of tenancy turnover and finds it very hard to get new tenants. To attract tenants, Peter is forced to lower the rental price of the property.
Meanwhile, the property incurs high costs in renovation due to poor tenants. The property only doubles in value appreciation over 20 years.
The end result is that Jim will have much more equity and security in retirement; Peter, on the other hand, will have years of headaches and much less to show for in retirement.
Let’s say both properties started at a $500,000 value.
Jim will now have a property worth $1.5M.
Peter will have a property worth $1.0M.
This is not to mention the higher rental income, less stress and personal tax benefits that Peter may have enjoyed compared to Jim!
The Final Word
Finding a good property in a good location is absolutely critical in your property investing strategy. As with the example above, it can make a dramatic impact to your financial security.
Take your time to evaluate the neighbourhood, talk to the local council about projects in the area, and make sure you talk to the local rental agents to get a good feel. Of course, don’t forget researching on the internet to find out more about the demographics of the area.
I hope this blog post has helped you.
To help you avoid mistakes and choosing a good property, I have compiled a free checklist that you can download below- for Free.
Just click on the big image below and I’ll have it emailed over :) Good luck in your property investing!