Most people believe that investors have a lot of money. They aren’t wrong either because when investing is done the right way, an investor can become wealthy.
Perhaps the last year didn’t play out as you wanted and most of your investment goals couldn’t be reached. This year presents various investment opportunities to change that and get on with diversifying or building your portfolio to reach those goals.
Before we go into the best property investment advice for 2021, we’ll discuss the three main types of investments or asset classes to choose from. This is often where the confusion starts for new investors.
What are the types of investments?
Debt investments are the most common type of investment and one almost everybody has. It means loaning your money in return for interests. In its basic form, everyone has this type of investment with their savings account. This also applies to CD accounts too.
The reason this isn’t a sustainable or relevant investment is that it often pays the lowest amount of interest rates. So no investor can rely on their savings accounts as part of their portfolio.
The main debt investments that investors find more useful are bonds. These could be minimum interest long-term government bonds or higher interest corporate bonds. Either way, they pay a substantial amount of interest that make for steady earnings.
However, it’s always healthy to have a good amount of money in your savings account for emergencies.
Hard assets are physical items with high value. This type of investing differs from debt investment in that there is no risk of borrowers defaulting or bankruptcy. But the risks can be higher than that of bonds. The most popular or recognizable hard assets are real estate. Property investments are diverse hard assets with different ways to make money. Examples of other hard assets include vintage cars.
Equity investments are about taking ownerships or holdings in a company. These type of investing are often stocks through ETFs, mutual funds, or shares that can be traded. Equity investments have higher interests than debt investment because you get returns when the company does well in growth and sales.
Knowing your investment types gives you a good idea of how you would like to invest. Hard asset types are always attractive to investors and its where property investment shines the brightest.
You’ve taken the first wise step in seeking out the best property investment advice. So we can gladly tell you that there’s much to know that will guide you to a successful investment.
For new property investors, it’s important to consider where you are going to invest, the type of property you would want to purchase, and the tax implications of your investment. Our detailed tips will help.
Start by understanding the basics of property investments
An investment property is a property purchased for the purpose of generating returns or profit on the investment. There are different ways to make money from real estate and they include:
- Money flow income also known as rental income
- Resale or real estate appreciation
- Real estate investment income
- Real estate related income
Hence, a real estate or property investor is someone who purchases real estate to generate income. Property investment is mostly a good investment choice because:
- It offers steady high returns
- Is adaptable for short to long term goals
- Is a resilient market
- It can be diversified in itself.
- Real estate builds equity.
- You can enjoy additional tax deductions
- It is a hard asset that won’t go anywhere.
You can buy an investment property by paying the full price with available cash or with a mortgage. There are better and cheaper ways to also invest in properties in 2021 which we will discuss as we go on.
Choose a real estate strategy
If you had $10 000 what would be your best property investment choice? When you choose a real estate investment strategy, you answer the question of where to invest in real estate and the type of property investment. This step will help to give clarity and prevent investing mistakes that can be costly. Here are some of the best strategies for property investment in 2021 with or without $10 000.
REITs means investing in real estate investment trusts. REIT companies own real estate and allow investors participate in the investments in return for high dividends. It is basically buying shares in a real estate company to be entitled to a share of the profits made from their income generating real estate. REITs are a highly beneficial property investment strategy. They have excellent liquidity and uncomplicated tax implications. However, you will need a substantial lump sum as investment fees.
Buy to let
Rental properties are one of the best property investments. It’s as simple as purchasing a home and renting it out for consistent monthly income. There will always be a high demand for quality rental properties and the value of your investment is set to appreciate with time.
The disadvantage of this property investment strategy is the hassle of dealing with tenants and you might need a lot of money to purchase a property.
You might have heard about house flipping from TV shows and the likes. This strategy involves purchasing an outdated or distressed home for a low price and then renovating it to resell at a higher price. House flipping can be risky but rewarding. You will need to be able to find such undervalued homes needing minor repairs and flip them to be aesthetically pleasing for good profit.
Factors like location, needs, and price are vital to consider in house flipping so you don’t lose your money in the end.
Renting part of your house
Not all property investment strategies require $10 000 to start. Some are way cheaper especially this option of renting part of your house. This strategy is also known as house hacking. You can use Airbnb to make it easier to rent a room in your house. You will enjoy tax benefits, cheaper costs, and more control over your investments.
The only downside might be sharing your home with strangers all the time. Weigh that against investing for your personal finance sake.
Real estate crowdfunding
If you’ve been on the property investment path long enough, you’ve likely come across real estate crowdfunding and what it stands for.
It’s a cool way to invest $10 000, less, or more. Real estate crowdfunding describes investors coming together to invest in larger commercial or residential properties. You can invest a small amount of money and earn a sizeable passive income as returns. The pros include skipping the hassle of property management, tenants, and so on. There are dozens of crowdfunding companies/ businesses and websites investors can buy in with in 2021.
In the UK and other parts of the world, investors can enjoy hotel property investment strategies. This means buying out a hotel room and generate returns from the guests staying at the hotel. But you can’t just do this with any hotel. As an investor you have to make sure that the hotel is popular enough to have steady guests. There is also the issue of lack of control over the investment or room since you don’t own the entire property.
Manage your investment with these property investment advice tactics
Depending on the strategy you choose, this is another invaluable piece of advice. You have to manage your investment properly if you want it to pay off. Be ready to spend money when it’s needed to make repairs or upgrade your property. This can ultimately help you save money in the long run and maintain your property’s value.
You can make sudden expenses easier by setting aside a portion of the returns each month in savings accounts. Doing this is part of ensuring a successful investment plan.
Develop the right mindset
Investors are not like everyone else. You have to develop the right kind of mindset to make you successful. As a property investor you can shape your mindset by staying positive and preparing for obstacles. This advice may sound simple, but if we’re honest enough, you’ll be surprised how hard it can be to stay positive in-between daily commitments, wins, losses, and more. Keep up positivity to see the best in your investment always.
There will also be unavoidable obstacles in your investment plan like unexpected expenses, late tenant payments, property market issues, and so on. Your preparedness to deal with managing these obstacles will help to ensure your investment success.
Familiarize with the risks
As we have mentioned above, property investment is a rewarding venture but it is not without risks. One of the many risks involved is your property could decrease in value instead of increasing due to the state of the market. Bad tenants in a rental property can also give you all sorts of nightmares like not paying their rent.
Grow your network and knowledge
Having a network means a lot of things. It means access to knowledge, deals, solutions, and more. Learning from other investors can help you avoid mistakes they already made. You can also build your portfolio faster by getting more investment strategies from them. Not to mention associating with like-minded people does great for shaping your mindset as an investor. If you’re wondering how to grow your network or find a mentor, you can start by attending real estate investing events and connecting online with investors you find.
Look for price growth and establish an exit strategy
Another valuable property investment advice for 2021 is to look for price growth and establish an exit strategy. An exit strategy is a plan put in place to sell your property later in life while getting the most profit out of it. To be able to do this you need to know your property price growth through capital appreciation.
Consider smart management tactics
The best property management always require a strategy. It helps know if you’re taking things in the right direction. One of the smart management tactics you can employ is to use a management company for property management service. The property manager will take over the hassles involved with managing your property such as finding tenants, seeing to repairs, collecting rental income, and more. It frees up your time and avoids stress.
Deciding if you need a service like a property manager depends on a lot of factors like:
- How close you are to your rental property (distance)
- How much time you have to manage the property
- Is there a good property management around you can trust?
- Is it cost-effective in the long run?
- Learn how to boost your property’s value
Over time you will need to boost your property’s value. Why? Because the market is ever evolving with real estate. Don’t be left behind in 2021. Ways to boost your property’s value include:
- Replacing old fixtures, doors, windows.
- Create attractive outdoor spaces.
- Fix structural issues.
- Invest in quality home appliances or installations like central heating systems.
- Home improvements or renovation projects.
- Expand your property portfolio.
Above we mentioned how it’s possible to diversify within real estate. Once you’ve started off with property investments, you can consider building a property portfolio. This goes beyond owning more than one rental property. You can invest in REITs, buy a mix of property types, or invest in real estate related or investment income.
Real estate related income is income made by specialists in the real estate industry. These include brokers who earn commissions from properties they buy or sell.
Ancillary real estate investment income involves the purchase and installation of facilities used within bigger real estate investments. Examples are vending machines and laundry facilities.
Use a seperate bank account for property
This should be a rule of thumb for an experienced investor. Keeping a separate bank account for property investment not only helps you track your money flow, but it also makes it easier to report on your income and expenses on your annual tax return. This benefit applies regardless of if you use an accountant or do the reports yourself.
Use a current bank account if possible not a savings account. If your figures stay steady and increasing you can say your investment is making money but if it continues to dwindle you’ll know something is wrong.
Treat your investment like a business
Some people invest to prepare for the future. Others do it for passive income. The reasons may differ but how you treat your investments can affect how they progress. Always treat investing in property or real estate like businesses. This is how many investors grow a multi-million dollar investment property portfolio.
So far we’ve gone through the best property investment advice for 2021. But, what about the worst property investment advice?
One of the worst property investment advice you could ever get is that property investment is easy.
If statistics are anything to go by, most property investors fail in the first five years. What helps others succeed are valuable advice like you’ve seen in this article and proper implementation. It’s why finding a network or mentor is a solid step in the right direction.
Try to build a team and not do things on your own. Property investors don’t reinvent the wheel, they follow proven strategies.