Five tips for getting started in property investment
Investing in bricks and mortar can be a great way to create wealth, but there are some golden rules to consider before taking the plunge into property investment.
1. Money - money - money!
Financial considerations are most important; there is nothing worse than having a good property investment turning into a bad horror movie!
Start by getting a pre-approval for finance from a financial institution; this will be an indicator of affordability and save time wasted on looking at properties out of your price range. It is important to know how much you would need to take transfer and possible renovations.
Make sure you include items in your budget such as rates & taxes, insurance, repairs and maintenance, increase in interest rates and the costs to sell.
Understand your cash flow and don't under-estimate on-going costs. The worst thing you can do is over-extending yourself.
2. Why & How?
Clearly define your investment goals. Are you looking for fast capital growth or wanting to hold the property long-term? During boom periods, it's much easier to renovate properties and turn them over for a quick profit. In slower economic times, it may take many years to achieve the same growth. Knowing what you want to achieve through your investments will go a long way in managing your expectations and avoid disappointment.
The ideal purchase plan should help you reach a point where your portfolio produces your target growth or income - it should serve as a structure to help you stay in the game.
Here's an example of a purchase plan you can follow:
- Define your strategy
- Set up your criteria
- Do your research- don't buy the first property you look at.
- Choose a property from your shortlist. Get to know the area, transportation linkages, and current and planned infrastructure projects.
- Get appraisal
- Do your due diligence
- Make an offer and negotiate
3. Location - location - location!
Choose an investment property in an area where there is a strong demand for rental accommodation. Buying a property close to transport, universities and schools will make it more attractive to potential tenants. Buy in an area poised for growth and development.
4. Head or heart?
When house hunting it's very easy to get caught up in emotions. While a home on a hill may have a stunning view, it could be a nightmare to renovate. Be sure you weigh up the pros and cons.
Look for liveable not luxury. Remember a rental property must be clean and functional. Don't get sucked into buying a property simply because it has a stylish interior.
5. Be informed - Stay focused!
Use the tools available to make an informed decision and keep abreast of property market trends; understanding the market will be crucial to making the right investment choice. It is easy to get overwhelmed when you're venturing into property investment for the first time and best to have a seasoned Property Professional to advise you.
But don't give up on your dreams. Tell yourself: if I buy the right properties today, in ten years I'll be leaning back with my feet up and a cocktail in hand, celebrating the fact that I bought properties that more than doubled in value, while my peers sit around regretting their decision not to follow me down the road of investment.
Stay focussed on your initial goals and follow through on your strategies - there is transformative power that a title deed brings to a person's life.
Author: Adrie Barnard