Seven Investor Tips for a Booming Market

Seven Investor Tips for a Booming Market

Strong institutional investment in property is proving to be a significant driver in the market right now. The median house price in Bozeman is now $899,500 – and it's never been higher. The median house price in America is now $363,000

There's good news in these numbers for everyone and while the headline numbers for all of America are interesting, it is not necessarily an accurate reflection of what's happening in our neighborhood. Further, the National Association of Realtors says that sales are slowing as interest rates continue to rise – a combination that may start to take the heat out of the market.

Investment in any area of the economy might seem risky while the market remains volatile, yet the prevailing economic trends suggest real estate remains an excellent investment in your future even after the recent swing to strong price trends.

With this opportunity in mind, below are seven tips for first-time property investors to help stimulate your thinking. And it's a sweet reminder of the key disciplines for those who are experienced in this space.

1. Define a strategy – Understand the level of investment you are comfortable making and your ultimate long-term approach. Are you going to put a lot of time into this project, or is it a sideline for you?

2. Do your sums – Rental income doesn't necessarily cover all your expenses. It's best to talk to a professional financial advisor to assess your capacity for property investment.

3. Where to start – If you've never invested before, it's a good idea to begin with residential property. The trends and values are easier to understand than those of the commercial sector. Once you've become confident, there's nothing to stop you from diversifying your portfolio.

4. Do your research – This is a critical discipline in property investment. Check out price trends and rental vacancies in your target neighborhoods.

5. Know what rents – It's not enough to buy any property. Your investment should meet the market demand of renters. A professional property management company is a key resource in conducting this due diligence. 

6. Worst house, best street – This is a cliché that references where you'll likely find the best capital gain. You can always renovate an apartment or house, but not the street.

7. Don't prioritize your tax strategy – Making a loss on a property to pay less tax on other income shouldn't underpin your approach. If rental income doesn't cover all your expenses, you should be satisfied the likely capital gain on the property will keep you in the black.