When people consider buying a residential property, investment isn't always on their mind. They're set on finding that dream house or a comfortable place to live in, and not always thinking about the profit they can make from this. But if you consider the opportunities residential real estate can offer to property investors, you may just get yourself a positive cash flow, a hedge over inflation and deflation, and a good way to diversify your portfolio. To let you see the good and not-so-good side of investing in a residential real estate, check out the list of its core advantages and some downsides.
- You can sell the property at a much higher price as its market value appreciates over time.
- Rental income can offer better returns on investments than other investment markets.
- This can be a great way to diversify your portfolio and leverage some investments.
- Think of mortgage as some sort of an enforced savings plan.
- Buying a house or residential property can be a lifetime investment for you and your family.
- Interest rates may increase and house prices may fall, depending on market conditions.
- The house may not be rented for some time.
- You may have to deal with tenant problems and issues.
- Managing and maintaining the property requires some time and money.
As with any type of investment, there will always be risks-risks that you have to weigh in before you make any investment decision. The good thing about residential investments is that they give you far more flexibility over certain aspects of this venture.
- You can choose a property according to your budget range, its potential for capital growth, the possible rental income, and other considerations affecting return of investments and your capacity as an investor.
- You have great options for mortgage and can choose how your loan(s) will be structured.
- You can always increase the resale and rental value of the property through renovation, repair, and other improvements.
- You can manage the property yourself or you may hire a property manager or management firm to handle this for you.
To make the most out of your residential investments, you have to be careful with the choices you make.
Explore your options. Are you going to buy a single-detached home or a multi-unit residential property? What type of house are you looking for? How much space can you afford? Are you going to be a landlord or are you planning on flipping the property before selling it at a much higher price. You have to explore available investment options to find the best property assets and great ways to manage risks.
Get help from real estate professionals. Work with a real estate agent or property broker to help you find the right residential properties. The broker can give you options that best match your investor profile as well as other preferences such as house style, location, price range, and others. The broker can save you time looking for the right property and even assist you with purchasing a house.
Consider the location. Whether you plan on leasing the residential property or selling it, location should always be a prime consideration. The location has much to do with the resale cost and rental value of the property. A great location has easy access to public transport, commercial areas, and key establishments. It's also easier to sell a house in a neighborhood with low crime rates or to rent a residential property in highly populated areas.
Consult financial experts. Before you put money into any residential investment, you'd want to talk to a lender or financial planner first. Ask a financial expert about a good mortgage plan based on your investment goals, capacity, and appetite for risks. Also take into account other related costs such as insurance fees, taxes, etc., options for repair and renovation, and other details that need to be considered when investing in residential real estate. Know how you can handle the ups and downs of the residential market and how you can manage your assets.