First time real estate investors should take a realistic look at their finances to determine precisely how much property they can afford.
By: Hitesh Khan/
Many factors influence whether a property is a good investment, including the location, sales price and profit expectations. For a first time real estate investors interested in acquiring rental properties, the key to successful investment is becoming educated about the real estate market in general and the specific properties of interest. When budgeting for the purchase of an income property, take into consideration additional costs such as maintenance of common areas and general wear and tear.
First time real estate investors should assess financial and professional resources.
Take a realistic look at your finances to determine precisely how much money you can afford to invest in an income property. If taking out loans is a possibility, consider interest rates. As far as professional resources, gather people who are experts in relevant real estate industries such such as property agents and mortgage brokers.
First time real estate investors should document the address and sales price of income properties in your price range. Peruse sites or apps that contain local real estate listings. You should also obtain more comprehensive lists from real estate professionals, and look at the list of properties available at local auctions. You should also write down the addresses and sale prices of affordable properties for future references.
First time real estate investors should research rental rates of comparable homes.
First time real estate investors should remember to research rental rates of comparable homes by conducting a search on online property sites. Once you have found the asking rent for comparable properties, call the owner or management company and ask about the property. Inquire about amenities to see how much one could expect to get for that rental rate. Ask how long the home has been available to get a sense of whether the asking rent is reasonable and in line with market expectations.
Never ever buy a property by just looking at it online. Make an appointment with the property agent or owner of the property to tour the inside of potential properties. Assess the condition of the floors, appliances, walls and other features that are most prone to wear and tear.
Don’t forget to estimate the cost of necessary upgrades and repairs. If possible, hire a licensed building inspection company to examine all the potential investment properties.
Tan Wee Kwang, Founder of Absolute Inspection pointed out that “excited owners, especially inexperienced first-time home buyers, often have no clue on what things to check in a newly handover unit.”
“Most owners would google for some tips and checklists online and use these as reference to go through a simple check and report some surface defects. Then they go straight into renovations so that they can move into the new place in the shortest time.
“Unfortunately, inspecting a house is not as straightforward as following a checklist and ticking off the items in the list. The construction of a house requires multi-disciplinary engineering knowledge to design it and involves the works of numerous trades and specialist works. Simply put, unless you have some construction experience or engineering knowledge, it is definitely not prudent to carry out your own checks on your property which is often your most valuable asset.
‘Then there are also latent defects that may only start to surface after owners have moved in or lived there for some time. By then it is difficult to do rectifications without damaging the renovation work. Also, the 12-month defect liability period offered by the developer may have already expired and it can get a bit tricky depending on the situation and nature of the defect that you are reporting.”
First time real estate investors should also talk to renovation contractors, who can give estimates on necessary repairs. Unless you can get a ‘friendship-price’ from a renovation contractor, always get three signed quotations form licensed renovation contractors before committing to any work.
First time real estate investors should make an offer on properties that fit their budget and real estate investment goals and make offers only on affordable properties. Before you put money down on any property, visit properties at different times during the day and night to find anything that could detract from the value of the home, such as a noisy train passing at regular times daily or noisy neighbours.
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