The biggest lesson 2020 is has taught us is that the global economy is like a row of dominoes, when one nation falls, the rest are soon to follow. Making smart money choices is more important than ever, but one thing that hasn’t changed is that property is still good place to invest.
While the market is not ideal for short-term property investments, those looking to reap profits a few years down the track should look no further than building or purchasing a residential property. If you’re new to property investments or are just after some fresh advice, these 4 tips on how to choose the best property investment in 2020 is a good place to begin.
1. How to Get Started
There’s no short cut around it, the best way to obtain an investment mortgage and avoid hefty taxes is to live in the home for a certain period of time. If your credit score is at least 580, you should be able to obtain a home loan with only 3.5% down payment. If you’re trying to get a commercial mortgage, you’ll need to come up with 20%.
Even if you have 20% for the down payment, tying up all of your money in equity that’s untouchable until you sell the property is not a good option. If you live alone or your partner is not afraid to rough it, you can get a starter mortgage for a small house, clean it up while you live there cheaply, and then get an appraisal. Raise the value of the property enough, and you’ve got your 20% for your next property.
2. Savings Goals
If you’ve purchased an older home in need of renovations, its best to have a saving fund to cover repair costs rather than relying on refinancing or having money left over from the purchase loan. Now is the time to double down on those repair expenses.
While you have money in the bank for supplies and repairs, find a 0% APR credit card with at least 12 months of interest-free payback. Look for cards with rewards that matter to you, like airline credits or free Amtrak miles if you enjoy travel. Other credit cards offer cash back, points at popular retailers, or grocery discounts. With the right card, it makes sense to purchase your home repair supplies on credit, then pay the card off from your savings within the interest-free period.
3. Flip or Rent?
If you plan to sell your property after a few quick repairs, you need to look in to tax regulations to see how long you must live in your property before selling to avoid fees. If you plan to live in or rent your property, you need to consider a completely different set of factors, like the neighborhood’s crime rate and number of registered sex offenders.
4. Single or Multiple Dwellings?
Some of the most valuable property investments are those with multiple dwellings, like a duplex or home with a granny flat. This presents multiple opportunities, from renting out both houses, to living in 1 while renovating the other, to selling the homes separately (providing you can obtain the necessary zoning). Duplexes also provide the perfect starting point for new landlords as when you live next door, you’re close enough to make sure your tenants take good care of your new property.