Where to start with property investment?

Have you decided to start investing in property? Not sure where to begin or what to watch out for? Read today's article, in which you will find practical advice for every beginner investor. Thanks to this advice, you will avoid the mistakes of people just starting out and will be quicker to see your first profits.

Step 1: capital

To start investing in property, you need a sufficiently high amount of capital. You cannot do without it. An average flat costs at least several hundred thousand PLN. Few people have that kind of money in cash. Beginner investors therefore often start with a bank loan, but even then you need a down payment of around 10% of the loan amount.

Remember that before you buy a flat or other property, you should assess whether you will be able to sell it for more or rent it out so that the profit exceeds the monthly loan instalment. Only then will the investment make sense.

Step 2: risk assessment

Every investment carries risk. Some, however, carry more than others. So before we decide to buy a particular property, let us consider the likelihood of the investment failing. The level of risk will vary depending on the type of property we choose. Buying a flat in a big city or a tourist town is a relatively low risk. There will always be people wanting to rent. It is different with large investments, such as a tenement house or a historic palace. Buying such a property involves high costs, often a major renovation and the need to draw up a suitable plan for making money from the investment. The risk of failure is therefore decidedly greater in this case.

If this is your first investment, it is best not to bite off more than you can chew straight away. Choose a safe property that will bring a smaller but stable profit. There will be time for big investments later.

Step 3: investment method

Before buying a property as an investment, you also have to decide whether you will let it out or plan to sell it at a profit straight away. Also consider whether it is better to buy a flat, or whether buying an office or a retail and service unit and leasing it out might be more profitable. The choice of investment strategy can determine the success of the whole undertaking, so decide wisely.

Step 4: calculations

Before you make the final purchase, calculate exactly how profitable it will be. Sometimes something that seems an ideal investment, expected to bring large profits, may in reality turn out not to be very lucrative. It is also a good idea to do the calculations if we are hesitating between two similar properties. In such a situation you should calculate the annual rate of return on the investment. To do this, we multiply the monthly income from the property by the 12 months of the year, and divide the resulting amount by the price we paid for our investment. The result is the annual rate of return as a percentage. The higher it is, the more profitable the purchase.

Step 5: purchase

When buying a property as an investment, take into account its location, surroundings, standard and so on. It is best to choose a unit in which we ourselves would like to live or work. It is also worth narrowing the search down to a few properties and then comparing their attractiveness from many angles. Finally, choose the property that appeals to you in terms of price as well as appearance and location.