There are a wide variety of types of properties and there are a wide variety of areas to purchase. There is also so much information that you can look at to work through where you want to invest. So how do you know if a house is an excellent investment or not? So how do we ensure that the property we buy is going to be a good investment?
Now I can’t give you all the answers and I can’t offer you financial advice, this is for educational purposes only. More and more people go into property investing plus they want to generate income or they would like to be wealthy. They look at this deal versus that offer without actually knowing where they want to go ahead their financial life.
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What does financial success look like to you? Because financial success for you is completely different from what financial success can look like for me it’s important that you realize precisely what it is. You may want a large house and a lots and Ferrari of overseas travel. For me, financial success is earning enough in passive income that I could spend as enough time with my family as I want and do my very own work, work that matters.
My definition of financial success is most likely going to be completely different to yours, so it’s very important to get down in some recoverable format of exactly what financial success is. Is that in conditions of equity? Is that in conditions of cash in the bank? Or possibly it’s in terms of yearly passive income which would be that the figure that I like to use.
And if it is absolutely passive income, how much per year? Whatever it could be, set your financial goals first, because then you can assess property predicated on your financial goals and if a house won’t move you towards your financial goals then you can avoid it. Or you’re evaluating two properties and one goes you towards your financial goals faster or with less risk, you can assess those 2 deals so much easier then. 2 is to analyse cashflow before capital growth expectations.
What I would recommend is that prior to going into any property is that you analyse the cash flow of that property. You can invest in negatively geared property or you can spend money on positively geared property (it doesn’t matter to me) but you need to know the cash stream when you purchase the house.
How much is it going to cost you or how much is it heading to pay you and are you pleased with that? The reason why this is so important is you can start to check out what cash on cash profits you want, and if you’re losing profits well then you need to look at the area. How much could it be going to grow by? You are able to do your analysis by yourself (which works fine but is frustrating) or you can use a tool like the Advanced Property Calculator. You want to look at things such as human population decrease or development.
You want to check out the economy and if the economy is growing because good economies suggest people are going to move into the region. If there are jobs people will move to fill up those careers then. Whereas, if there are no working jobs people leave the area in order to pursue employment.
It is important to know what different areas that employment is within. Is it all in mining or could it be all in agriculture and exactly how is a drought going to have an effect on agriculture etc. You might also want to look at the kind of housing. 4 to learn if a property is a good investment or not is to be sure you don’t pay too much for this property up front. This is one of the biggest mistakes that new investors make.
They jumped in to the market however they actually purchase something to get more than it’s actually worth. Which means that you’ve got years simply for the marketplace to catch up to the price that you covered that property. This happens all the time when buying off the plan. So how do you ensure that you don’t pay much too? Well a bunch of various ways there’s. You can check out the prior sale price of that property specifically and compare it’s current price to the growth in the area. You can check out comparable sales in the certain area.