We are all looking to maximize our returns, whether we are buying a house to live in it, rent it, or just fix it up and sell it on. Real estate is a great place to put your money in the vast majority of cases, but if you are viewing things as an investment, it can also be something of a cash drain. The trick is, of course, to try and maximize your returns and be proactive about managing your little – or large – piece of real estate.
There are a few different strategies you should be considering for any property. We’re going to take a look at some of the most common, and reveal how, if you employ them correctly, you can maximize your returns, improve your bottom line, and eventually walk away with a tidy profit. Let’s get started right away.
Make the right choice
Want to know the best way of ensuring a high return at some point in the future? Ensure that you choose the best property in the first place. Look at homes or commercial property in up-and-coming areas rather than locations that are already peaking, or are prohibitively expensive. Seek out homes that are on the market for less than the location’s guideline prices for similar properties – and find out why they are cheap. Some will need a lot of work done – but even after these costs, you could still make a profit. One of the best ideas for this method is to buy the worst – and therefore cheapest – property in the best area. It can take some time to find the ideal home or property, and it can also take a while to renovate it up to a particular standard. But this is not a game you should rush.
That said, while it’s important to take your time in selecting a property, once you find one, move fast. Don’t mess around when it comes to staking a claim for a property. Too much umming and ahhing will almost always result in someone stealing in ahead of you. Watch out for new property launch events and keep your ears open for development news in your local area. For example, if you are one of the first buyers for a home in a new development, you will often find the price is much lower for the first phase than the the last. And by the time all the homes go up, you will already have made a significant profit in valuation terms.
If you are prepared to put in some work yourself, you can reduce a significant amount of your costs. For example, let’s say you decide to buy a ‘fixer-upper.’ If you were to, say, project manages the building work; you won’t need to spend money on hiring one. You can save even more by offering your services to the construction firms you use – laborer for them, as an example. It’s the same for when you invest in a buy to let property. You could hand over the general maintenance to a professional property manager, but if you go down the DIY route – and know what you are doing – it’s possible to bank all that money rather than spend it.
The more you look after your property, the better your returns will be in the long-term. Take the buy to let market, for example. A beautiful, well-maintained property keeps tenants happy and encourages then to stay for longer. It’s also easier to fix up and decorate at the end of the tenancy, meaning less time suffering the financial consequences of vacancies. Plus, spending small amounts on regular maintenance as you go on always works out significantly cheaper than having to find a small fortune to repair a breakdown – a boiler or central heating problem, for example.
Tax implications can have a significant impact on your ability to turn a profit. It’s important to use an accountant, but also familiarize yourself with the property tax laws of the country you are buying in. In many cases, people will work hard to maximize their profits, but a few wrong tax decisions can see all those benefits – and maybe even more – be creamed off by the government. For example, let’s say that you have a family home and want to invest in a holiday home. It might be possible to switch your permanent residence status to the holiday home and continue living in your regular home. Why would you do this? Well, you are more likely to sell your vacation home – and if it is your official, permanent residence, you might escape having to pay any capital gains tax.
The long game
In almost all cases, your returns from property investment will be greater if you bide your time. Always try to play the long game when it comes to property, and if you do go down the quick fix and sell route, ensure it is part of a mixed portfolio with other long-term investments to reduce any risk. There are plenty of short-term ways of making excellent returns on a property, of course. But there is also a huge risk involved, and it is not a strategy we would advise for the inexperienced.
Finally, don’t feel like you have to do all of this on your own. Getting started in property investment is a complicated game to play, and it takes time to build up the necessary experience. A mentor or advisor might be a good idea until you are comfortable and confident in buying and selling the property. Not only will they be able to give you experienced knowledge, but they will also help you strategize for long-term investment growth. Make sure you go local, too, as a reputable advisor will know a lot about the markets in the surrounding areas and help you understand all the laws involved.
We hope this guide has helped you understand some of the successful strategies for success in property investment. Good luck!