Achieving long-term financial security through property investment has become increasingly popular as prices hit record levels across much of America.
Young people are getting into the investment game, recognising the possible long-term growth potential of the sector and its capacity to generate a lifetime of wealth.
Many begin their investment journey by holding on to their first home to start climbing the property ladder. Instead of selling, they rent it out, giving them two properties. Over a few years, with dedication and determination, you may be able to turn two properties into a portfolio of three, or four or even six properties.
If you’re an ambitious young investor and about to buy your second home, you should think about whether you should sell your current property, or rent it out and become a landlord.
A financial adviser will be able to help answer this question. You may find you’re not in a fiscal position to own two properties yet, in which case you can build a strategy to get you to that point.
But let’s say the planets align, there are still important questions to answer concerning the suitability of your property for renting and your desire to be a landlord.
Demand equation
Determine the demand for rental accommodation in the area where you’d have your first investment property. Neighborhoods with solid employment, transport and good schools, a hospital and university are great locations.
Rental income
Check-out rent levels and see if there are a lot of similar properties for rent. You want to be sure the rent will be sufficient to fulfil your financial obligations. Again, work with a financial adviser.
Capital growth
Being a landlord isn’t just about counting the rent money each week. You want capital growth over the medium to long-term. Study local prices trends to satisfy yourself that your property will gain value.
Do you want to be a landlord?
Dreaming of becoming a property investor is great, but a few realities come with it. You’ll need to budget for maintenance, and you’ll occasionally have to pay for major repairs. Good tenants can be hard to find, and eventually, even the best ones leave. So be prepared for some work or locate a property management company.
Ready for commitment
Property investment is not just a financial transaction but a life decision. You may lose money if you don’t have a long-term view of wealth creation.