Property Investment is a financial area that many people know. For it to be turned into a Cash Flow Machine, it needs to be nurtured and looked after. More than often, people have heard of the wonderful things of people getting rich in investing in property. What you may not have heard often are the grievances that they have suffered in such investment. Normally these grievances are the results of the mistakes that they have done.
OVERSTRETCH Your Financial Capacity
You must not overstretch your finances in financial investments, especially in property investment. It takes time for investors to realize the gain as property prices may not move fast.
Keep the yearly mortgage payment loan to below 35% of your yearly income. Ensure that you have also placed aside money for 1 year’s worth of the mortgage instalment loan. Anything more than that may mean that you may have overstretched your budget and stress will start sipping in when you meet with a bad economy.
FLIPPING Properties For Fast Money
Flipping of Property refers to the quick selling of property after getting the Option to Purchase agreement. We have heard of many stories from people who have made good money buying and selling properties in short period of time.
Have you heard of stories from people who have incurred quick losses and even bankruptcy in flipping properties? Most probably you have heard of it and probably not many. Not many people talk about their mistakes as they do not want people to know.
What I can tell you is, there exists quite a substantial number of people who have gotten into financial difficulties by flipping the properties wrongly.
Avoid Flipping Properties in a down market. How do we determine when will be a down market? Any one can predict? If we do not have a crystal ball to predict, it is best to avoid flipping properties all together. Always ensure you have enough cash to buy the property and remember that cash flow from property is important.
Buying at WRONG Time
Is there a wrong time to buy property? All the agents will tell you ‘No’ otherwise they will be out of business. However, they are right. Property will keep going up. Even though it may go down for a period of time before resuming its uptrend. You will just need to have holding power and you will be all right. So the Property Agents are right!
There is one item that may need your attention. Though the trend is presumed to be up in the long term, buying at peak price will set you back by a good number of years before you can see the price going higher than your purchased price.
Time opportunity is important and need to be taken in good consideration. The money could be placed into better use. Do not buy when everyone is buying. Often it means the peak is almost reached.
Buying Property is easy. Just have cash for the initial deposit and borrow the rest from the bank. Find a tenant to rent the place and use the rental to pay the monthly instalment.
The above scenario is just a generic flow. The issue is, if you have gotten a place where there is no amenities, you will find difficulty in finding tenants. No tenant means no rental. No rental means that you have to pay for the loan.
It will need planning plus good unit to get rental and probably a good one. Be diligent and know the property that you are investing in.
Know the amenities around the place. Know the rental yield of the surrounding buildings. Know who are your target tenants.
Every time we visit a showflat, we have the tendency to buy a unit there. Why is that so? The emotions comes from the fear of losing out to others. With only 6 units left, what if I did not manage to buy the unit. The fear of missing out on the 6 units form the basis of our emotions. So many people have purchased the units, only 6 left. So many people have purchased, it must be a good deal. Wouldn’t you be tempted as well.
Buy the unit not because of how popular it is or how many unit have been taken.
Buy only when the unit fits your requirements such as:
– Good amenities around the location.
– Timing of buying is right
– Price is within your budget.
– Rental yield around the area is good
The Bank Will ALWAYS Lend You Money
It is dangerous to assume that the bank is obliged to lend you money. This is certainly not true. It is best to get in-principle approval from the bank before you sign any documents. For whatever reason, the bank did not offer the loan to you, you will have to forfeit your initial payment.
Always get an in-principal approval on the loan amount from the bank first before you make any committment.
Shorten Your Financial Journey
Learning from Other People’s Mistakes