A lot of people make the mistake of thinking that property investment is an easy way to make an income. The common misconception is that all it takes is finding a property, fixing it up, and then choosing to rent it out or sell it on. However, the fact is that property investment is not as straightforward as it seems. There’s a lot more to this popular method of money making than meets the eye. Below, we’ve explored some of the reasons why property investment can be more complex than you would think.
There are risks
When it comes to investing in property, the thing that most people focus on is the potential income. However, what it’s important to understand is that there are risks that come with property investment. While most investors do well renting out or doing up and selling property on, it’s important to understand that there are no guarantees. You could invest all of your money into a property and then not be able to find suitable renters for it, for instance. Investment always comes with risk and property investment is no different. There is potential to make a great profit, but there are also risks that you should be aware of.
You’ll have to cover additional costs
As well as buying the property and paying to do it up, you’ll have lots of other costs to cover. There are fees for the use of realtor services and also for having a surveyor check over the property. There’s the cost of hiring an attorney to help you complete the legal side of the sale – this applies both when buying and selling. Then there’s the fact that should you sell your
property on, you’ll be expected to pay tax on any profits that you make. That being said, there is an exception that you could use to your advantage, known as IRC section 1031. To find out more about the ins and outs of this, take the time to read up on the 1031 exchange property identification rules. The fact is investment property doesn’t come cheap. You may be able to make a good income from it, but to do that; you need to have enough money to cover all the costs.
You need to ensure that you stay within the law
The first thing that you need to know is that when it comes to doing up a property, you need to ensure that you meet all the laws that are in place. In regards to renovations, there are certain standards that have to be met. This is why a lot of investors choose to use contractors for renovations so that all necessary safety standards are met. If you’re going to rent the property out, there are various safety features that you’re responsible for. Such as fitting fire and carbon monoxide alarms, for instance. You’ll also be responsible for certain annual safety checks and will need to have the correct insurance in place. There’s a lot of costs that come with being a property investor and it’s important to understand that.
The truth is property investment can be a fantastic way to earn an extra income. However, it’s not as straightforward as a lot of people think. There’s a lot more to investing in property than meets the eye and it’s crucial that you realize that.