Are you thinking of becoming a property investor?
If you’re planning on trading the smashed avo and craft beer for a property portfolio, knowing where to start can be challenging – especially if you’re the first in your group of friends to embark on the property investing path.
Here are six tips for young investors, to give you an edge in a game dominated by cashed-up, experienced Baby Boomers.
Tip #1: Be realistic about your abilities
Renovations are fashionable at present - spurred on by those reality TV shows like The Block.
But can you really juggle a renovation along with your job commitments?
And do you believe you can manage the paperwork, repairs, and relationship with tenants yourself, or should you employ a property manager to handle all that for you?
With youth on your side, you have an overabundance of naiveté and confidence, which can make you feel ready to take on the world.
This can be a great asset… unless it leads you to overcommit, ultimately costing you time, money, and stress down the track.
Tip #2: Educate yourself
These days, much of the information you need to make smart investment decisions is right at your fingertips, thanks to the internet.
Of course, you need to get educated about creating your own investing strategy.
Why do you want to invest? What are your goals? How will investing in property benefit you?
These are some of the questions that can help you unlock a clear path forward for your investing decisions.
Obviously, you'll learn lots from sites like this one by subscribing to our daily Property Update newsletter or by listening to Michael Yardney's podcast so you can learn on the go.
Tip #3: Talk to real people
In a world dominated by the internet, it’s tempting to source all of your information without ever leaving your desk.
But all these facts and figures can’t replace the anecdotal data you’ll gain from speaking to "real" property advisors with experience in the area.
They should understand the growth drivers in the area that will lead to long-term capital growth
It's also important to understand demographics - who likely purchasers and tenants are that help drive the local market.
For example, is it a popular area with families, or are professional commuters the norm?
This information can influence the type of dwelling you purchase, where you buy, and the features you look out for – such as a secure backyard, ample car parking, or proximity to the local train station.
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Tip #4: Look further afield for bargain properties
“Rentvesting” has become a real estate phenomenon, as those in expensive cities and suburbs seek out the more affordable investment opportunities in other suburbs and towns.
Rather than simply looking at listings in your local area, consider properties elsewhere that may be cheaper, offer better rental returns, or have more potential for capital growth.
For example, if you live in Sydney or Melbourne, rather than looking in the outskirts for cheaper suburbs it's worth considering buying in Brisbane where you can get a well-located house on a substantial block of land in the middle ring suburbs for the same price as an apartment in your home state.
Tip #5: Save, save, save
Don’t jump the gun and begin making offers the second you’ve saved a deposit — you’ll also need money to cover other buying costs such as stamp duty, building, and pest inspections.
And a buffer for the unexpected contingencies
Once you’ve found and purchased the perfect investment property, you need to have the cash flow for ongoing expenses such as strata fees, water, council rates and insurance, and a slush fund for both regular maintenance and emergency repairs.
Set up a regular direct debit to a high-interest savings account at a different institution each payday — you won’t miss it, and it will set you on a path to excellent money management and financial security in the future.
Tip #6: Get sound financial advice
Your Uncle Larry, though he means well, is probably not qualified to advise you on your finances, and his best intentions could cost you big time if you’re stung with a nasty tax bill or realise you’ve missed out on deductions after the fact.
While mortgage brokers, accountants, and financial planners have specialised knowledge in their areas, don't ask them for property investment advice — that's not their forte.
Instead, seek appropriate professional advice from an independent property strategist — someone who has no hidden agenda and no properties to sell you.
In fact, that's what the team at Metropole specialise in — we have no properties for sale and start by helping you define your investment goals, then we help you implement a plan we devise together using our Wealth Advisory or Buyers' Agency team.
