requires work : finding tenants , taking care of their needs , maintenance , participation in housing company administration , taxation ...
Raitala says that a serious investor will do his / her homework before committing to anything – and this means crunching some numbers . First thing to consider is the cashflow : what could be considered a realistic cashflow , taking into account , for example , changes in tenants , day-to-day maintenance costs and property renovations ? Sometimes housing companies own apartments or business premises in the property which , in turn , generate revenue to the company .
“ On the other hand , there may be various factors which make life tougher for the housing company , such as the expiration of land rental agreement and a new agreement which is more costly ,” Raitala says .
Price of Money
Then there is the question of financing : how much of your own money are you willing to invest and how much comes from the bank ? ” The interest levels won ’ t stay at the current low levels forever ,” Raitala cautions . Also taxation practices may come as a surprise ( e . g . tax treatment of renovation costs ).
Through all of this , Raitala points out that the investor must keep his / her eye on the big picture : instead of focusing on a single property , be mindful of the rest of your portfolio and your financial situation in general . If hefty renovations hit some key properties , there may be need for a quick exit plan with regards to other real estate assets .
When it comes to target selection , Raitala observes that many elements come into play here – but it all starts with the location . Good traffic connections are a big part of the equation as well as zoning – what ’ s in the cards for the neighbourhood , say , five years down the road ? Also , you must consider the surroundings of the apartment , if there is frequent pollution from traffic or an active construction site next door .
“ Take note of the general price development in the area . Then you can decide if you ’ re simply following others that have made the investment in a popular area or do you look for alternative areas that also enjoy good location .”
Get Technical
Assessing the technical condition of the investment is another must . At minimum , you must be aware of the schedule for major renovations in the building . When it comes to the apartment itself , it ’ s a good idea to have an expert verify its suitability .
“ If you ’ re renovating the apartment , get bids from various companies , exercise proper caution and keep the receipts .”
When determining the desirability of the apartment , a flexible floor plan is often a smart way to go . Still , even if the floor plan is not optimal , putting in quality materials is sure to attract tenants .
Which brings us to tenant selection . Raitala comments that outsourcing this part is always an option , but if you ’ re willing to find the tenant yourself , it ’ s not really brain surgery : the number one thing is to make sure that the tenant can handle the rent every month . Familiarising yourself with the history / recommendations of the prospective tenants should help in this process .
Taking Care of Business
According to Raitala , a smart private investor will also pay attention to the administration of the housing company . “ You should participate in the decision-making of the housing company ,” Raitala says , adding that if the company has a great property manager to supervise the assets that is already half the battle .
Of course , when looking for an investment opportunity , there ’ s less room for emotional / soft factors that always impact you when you ’ re out there trying to find a home for you and your family . Raitala points out that you should always stay in the realm of rational issues – where price tags are easier to figure out .
“ Having an expert by your side , a good realtor or a lawyer , can help you assess and decrease risks ,” she says , adding that using quality professionals goes a long way to making sure that your investment is a winner from day one . l
Nordicum 53