More people are investing in properties to diversify their portfolio or create an ongoing income stream. There’s more success than failure in property investments compared with other investment vehicles. This is because property investment is simple. It’s just like playing a game of Monopoly.

An investor buys real estate intending to have a return of investment. The return can be achieved by renting out or reselling the property. But, simple doesn’t mean easy. That’s why you need to understand fully before you begin to invest.  

Here are three tips for understanding property investment:

1. Research On Property Investment 

First, you need thorough research on property investment to know if it’s right for you. You can either use your own money or get approved for a loan to purchase a property. 

If you decide to get a loan, make sure that you’ll still be able to live comfortably outside of the income generated by your investment while, at the same time, being able to pay for your mortgage, taxes, and other expenses. Otherwise, your investment will just be a liability instead of an asset.

When buying your first property, you must be logical when making a decision and don’t just buy a property on impulse. Instead, think ahead and consider the possible financial gains. You can do this by deciding what kind of property to buy to meet your income goals. You may also seek out a multi-unit builder to help maximize your returns, especially if you decide to opt for rental properties.

In the case that you have a low investment capital yet don’t want to get a loan, consider another alternative such as Real Estate Investment Funds (REIT).

2. Consider An Alternative 

Property investment can be as easy as buying a mutual fund. There’s a great alternative investment vehicle called Real Estate Investment Funds (REIT), which is similar to a mutual fund. However, instead of pooling money to buy stocks and bonds, it focuses on acquiring income-generating commercial properties such as offices, warehouses, apartment buildings, or hotels.

When owning a REIT, you won’t have to deal with repairs, maintenance, upkeeps, managing tenants, and even producing a down payment because it trades like a stock. It also has a lower-than-average correlation to stock market performance, making it a good hedge against inflation.

3. Be In The Game

Too much research can cloud your judgment and lead you to not investing at all. The best way to learn about property investment is to be in the game. Although it may be more work than you think, property investment is quite simple, and you don’t need to be an expert to start investing.

It’s better to start small, perhaps residential real estate. Residential real estate costs less than commercial properties and don’t require intricate knowledge about the investment. Another way to start small is by investing in REIT.

Once you’re in the game, you can continue learning and start generating income that you can use to acquire a piece of commercial real estate. After all, experience teaches well when it comes to investing. You just have to be confident and smart enough to face the risks.

If you decide to get a loan to get you started, investing in a rental property can be a wise decision. It can generate income to pay off your loans.

The One Percent Rule

The one percent rule is the general rule of thumb when it comes to investing in rental properties. In this rule, your gross monthly rent should, at least, be 1% of the price of your investment. For example, if you bought a rental property for USD$100,000, the rent should be USD$1000 per month. This can help you get a good return. You can adjust the percentage accordingly, depending on the location of your property. 

Final Words

Property investment is a good option if you want to begin building wealth or just generate additional income. Although property investment can’t guarantee overnight success, it can generate streams of income and can be a good long-term investment because the value increases over time in most cases. The more time you hold on to a property, the more its value increases. 

Just like any other investment, property investment has its risks. To make sure that you can generate income in your investment, you need to understand the risks to manage them. You need to evaluate the expenses, potential income, and, most importantly, the return on investment. In doing so, you can create a great action plan for your investment.