You can own two main types of properties: residential property and investment property. While you live in a residential property, the investment property is meant to provide a long-term income. If you decide to become an investor, there are many things to think about, which can be a huge source of stress. Therefore, it is crucial that you develop the right mindset to become a successful real estate investor. Below, we will look at some mindsets to help you succeed in your investment journey.
You Need to Invest Time into Your New Business
Real estate investment is not always about letting someone lease your property and collecting rent. This is a business, and successful investors understand this. You need to treat real estate investing like any other business.
First, you need to set some time aside to deal with any issues that come up. Leaving issues to sit for some time can lead to even the smallest of issues becoming a massive problem. To make things official and make it easier to get into this mindset, consider establishing a real estate company. Such a company will give you a way to manage your property. It can also open up opportunities like getting business loans to invest in new properties.
Think Objectively
As mentioned, real estate is a serious business, and you should not let emotions get in the way of things. Do not purchase properties just because you like the neighborhood, lived there as a child, or they are close to where you work. All you need to think about is what your potential tenants will consider important when considering your property.
Think objectively of things like transportation connections, schools and nearby amenities, type of property, and property’s condition.
Understand How Finances Work in Real Estate
Every investor understands that your monthly expenses must be less than your monthly rent to turn a profit. However, things are not always as easy as this in real estate. It is never only about ensuring that the tenant pays their rent on time or that the property brings in enough money to cover the expenses every month.
You need to consider expenses like loan repayments, additional payments, and other costs. Several tools can let you know how much you can borrow and how much you need to repay each month for your loan repayments. Once you borrow a loan, you can use the HBD loan calculator provided by PropertyGuru to calculate your monthly mortgage repayments. PropertyGuru makes it easy to find, buy and rent different types of properties in Singapore. They also offer other services like helping prospective homeowners find the right home loans from leading banks and agents to help them with their property purchases and leases.
The results you get from the loan calculator can then be used to calculate your total debt servicing ratio, which should not be above 60% of your total monthly income.
Next, you need to factor in additional payments like property agent commissions, property taxes, maintenance fees and costs, home repairs, insurance, and others. Only once you understand all these numbers can you calculate your expected net rental income and investment yield.
Understand the Market, Do Your Research If You Must
You should always know what types of tenants you want to attract before you invest in any rental properties. These types of tenants will affect the type of units you buy and the type of service you offer. A good way to understand the market is to picture your ideal tenant.
Think of factors like their gender, the types of family they would have, what types of amenities they would like, their taste in furnishings, and so on.
Factors in the larger market will also affect your investment. Things like changing home loan rates, changes to property sentiments, economic turmoil, and more are things you should be wary about all the time.
Have an Exit Plan
Many people do not want to exit an investment because they either invested too much time and money into it or do not want to seem like a failure. Savvy investors know that sometimes it is better to cut your losses and exit an investment position.
It is better to have an exit strategy to know what to do if things do not go as you anticipated. Such an exit strategy would entail when to sell, who to sell to, how much to sell the property, and more. Know that putting an exit plan in place is perhaps the most challenging part of being a real estate investor because, in some ways, you are admitting the risks that come with these types of investments.
Real estate investments are a great way to build wealth and plan for the future. However, you need to have the right mindset to be successful. Proper planning, research, understanding of the market, and knowing when to get out of the investment make for great real estate investors.
