Managing your budget is one of the most important elements of your investment. If you get this wrong your investment could turn out to be a disaster, if you get this right, you could be very successful in your first investment. Before starting to look at investment properties you need to establish your budget. There are a number of processes that need to be considered when doing this. You need to consider what portion of your savings you are able to invest in your property. You need to consider the rate at which you are able to grow your savings, for example, what portion of your earnings are you able to save from your day job (if you are working). You need to consider whether or not you need to take out a mortgage.
If you are in a unique situation where you do not need a mortgage, then that will have an advantage when purchasing your first investment property and reaching a point of making a return from it. You need to establish your budget for your first investment and be clear about the amount of savings you can put towards the purchase of your first investment before you move on to the next step of this process if you want to increase your chances of success. These are the important key factors that need to be considered at this early stage.
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Consider the following points:
• Make sure you have included all the additional costs involved in the purchase and repair of the property
Set a budget for your first investment project. For example, let’s say that you fix a budget of $160,000 for the purchase of your first investment property. You need to ensure that you have calculated for all the additional fees that are involved in purchasing the property, carrying out any work that is required to bring the property up to the standard that is required to let out your property. You must also calculate for any legal fees that need to be paid during the purchase of your property and during the letting process of your property. Furthermore, you must also consider the cost of getting insurance for your property once you have purchased it and during the process of letting it to a tenant.
• Try to not take a mortgage on your first investment property
A large portion of your overall budget will most likely depend upon the size of the savings that you have and are able to put aside for the purchase of your investment property. For instance, if you have $120,000 in your savings account, you may decide to have a maximum budget of $110,000 for your first investment property. On the other hand, you may decide to spend more on your first investment than you have available in your savings account, for example, you may set the budget for your first investment at $200,000.Personally, I would recommend that you set a budget for your first investment property that would allow you to buy your property completely by cash. This is so that you do not have to take out a mortgage in order to purchase and set up your first investment property (the choice is yours).
If you do consider buying your first investment property at an amount that is greater than what you have available in your savings account, then you will need a mortgage for the additional balance. To do this you will need to talk to a bank (financial adviser) which is most likely to lengthen the process of purchasing your initial investment property. It is better to look for an affordable house for sale that you can buy in cash.
If you do not set a budget or you do not calculate the size of your savings that you are able to put aside towards your investment property, then you could ultimately suffer losses rather than gain profit in the long term of your investment.