Financial factors to consider before buying an investment property
A property investment is a great idea to grow your financial portfolio. Property is a safe investment as the price tends to increase over the years. Property can also be repurposed to add more financial value and even earn from it, such as letting the property to a tenant. However, purchasing a property should not be done in haste. Here are financial factors to consider when investing in real estate.
Your Financial Status
Investing in property is an expensive affair. The two common ways of raising funds to invest in property are to take money from your savings or borrow from a financial institution. Both of these rely on your financial status.
- If you are dipping into your savings, it’s necessary that you have a large reserve of funds.
- If you are applying for a loan, it’s crucial that you have a positive credit score.
Location is Everything
If you want your property investment to turn into a success, then location is the most important factor. Choose the right location to invest in, and the value of your property will increase. However, pick the wrong location, and the property value will remain statement or worse, will drop. Here are few tips to find the right location.
- Map the Neighbourhood:
Map the important locations in the neighbourhood. This could be restaurant areas, school, gardens, etc. A neighbourhood with many important locations points to strong valuation.
- Research Any Upcoming Projects
New construction or infrastructure projects can have a drastic impact on the value of the neighbour.
A safe investment location would be the prime areas in Singapore such as Orchard Road, Nassim Road, and Sentosa.
Valuation of Property
Valuation of property is a must to ensure that you are paying the right amount for the property. It’s recommended that you hire an expert to perform valuation of property as there are several methods to do so. These methods are:
- Sales Comparison Approach
- Cost Approach
- Income Capitalization Approach
Future of the Property
A good location will ensure that the property value will continue to rise. Once you purchase the property, you have to make a decision on what to do with it. You have the option to:
- Rent it out
- Build a new construction
- Sell it
It’s recommended that you wait for the property price to increase before selling it. However, it would be a mistake to allow the property to be vacant. To reap its full benefits, the property should continue to give you returns. Renting it out is one method. On the other hand, building a new construction requires more effort on your part to turn the property into a returning investment.
These are factors to consider when investing in real estate. Investing in property is no easy task, but done right, it can turn into a large, recurring and effortless financial reward.
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