Investing in a rental property is an effective way to build wealth and strategy for building wealth. It will improve cash flow, offers tax benefits and is generally more stable than other investments. But as exciting as that sounds, the whole process can also be complicated.
How to Invest in Property
Properties are generally less prone to volatility, but they not without risk. It requires detailed planning, research, knowledge and importantly the right people behind you.
We have identified some steps to make sure that you are on the right track.
1. Review your personal cash flow and budget
It is important to understand how much cash you have to invest in property and whether you can afford the cash flow impact on owning an investment property. Work out you incomes and expenses to start with. Check if you have at least enough for a deposit amount( generally 10% to 20%). If not you will start by saving for a deposit.
2. Set your goals
What are your goals? What are you looking to achieve? It is important to be clear about these and talk to experts such as your accountant and financial advisor. You need to consider your short and long term goals.
3. Talk to your accountant
You need to understand the tax implications of buying an investment property and your accountant is the best person to talk to about this. He may also assist you with your cash flows.
4. Find a lawyer
A lawyer is an important part of the transaction. He will handle all the legal issues like the sale agreement, transfers and getting the property registered in your name. This sometimes is quite a challenge considering the Ministry of Lands in Kenya.
5. Create a property evaluation model
By now you have clarity around how much money your lender will give you, your accountant has verified your budgets and you have the legal support team ready to go, but you don’t know exactly the type of property you are after.
This step is all about creating a property evaluation model – to identify what criteria in an investment property is important to you. This, of course, starts with your budget, location of the property, size of the property, type of property, what type of tenants you want to attract etc.
6. Search for a property
The best way is of course to engage a registered estate agent. Talk to us at Eastwood to assist you. We can come up with a list of properties that fit your criteria dn budget. We shall also advise you on some of the financial matters and assist you to look for an appropriate lender.
7. Engage a Property Manager
After purchasing your investment property, the next key decision you will need to make is whether you will employ a property manager to help you, or whether you’ll manage it yourself.
A property manager costs approximately 7-10% of your total rental income, however the services and expertise offered by a good property manager is worth much more than this fee, plus in many cases, especially commercial properties, the agents service fee is tax deductible.
The key roles of an Eastwood Property Management
- Advertising your property for rent
- Open your rental property for viewings
- Screening tenants including reference checks, rental history review
- Manage the condition report process
- Manage the tenancy agreement signing process and handling questions
- Manage your financial accounts for the investment property and provide regular reports
- Inspect the property on a regular basis
- Organise contractors for repairs and maintenance
Whether you are buying or selling a home or investment property, asking your real estate agent the right questions gives you a good idea of the agent’s approach and knowledge. It can also provide you with useful information about the property and the local market.
At Eastwood, our team is waiting to assist you. Our experienced real estate agents offer you experience alongside excellent market knowledge that helps make the buying or selling process as smooth as possible. We have been voted Australia’s number one real estate brand, and a little help from our team can be invaluable when it comes to buying or selling a property.