Here’s the good news: investing in property isn’t all that hard.
But it does require you to follow a number of processes in order to do be successful.
By following these eight essential steps, those new to investing can move forward and start to build a profitable property portfolio that delivers growth for years to come!
Step 1: Educate yourself.
This is perhaps the single best tip for newbies, because purchasing any old property is likely to result in a failed investment.
Most investors never get past their first or second property because they haven’t adhered to a strategic plan.
Most properties are not what I call investment grade and don’t deliver producing rates of return.
So the first step is to understand which property investment strategies have worked best for others who have succeeded before you.
In general this has been buying high-growth properties that have owner occupier appeal in the inner and middle ring suburbs of the three big capital cities.
Strategic investors understand that they must first build a significant asset base before they can lower their loan to value ratios and then eventually live off their properties.
This means they chase capital growth rather than cash flow in the early stages of their investment career
Step 2. Do your research
As around 80% of your property’s performance will be due to its location, find a location where there is strong economic growth which will lead to jobs growth which will lead to population growth we will lead to demand for housing.
You’ll find this will occur particularly in our East Coast capital cities.
Then look for suburbs where wages have grown faster than the state average – these are often gentrifying suburbs or established “money belt” locations.
Step 3: Be realistic about your costs
Buying an investment property and then preparing your property for the rental market will require a certain amount of time and money; it’s best not to underestimate just how many resources are involved.
Set aside a cash flow buffer for a rainy day – somehow they always seem to come around.
Step 4: Buy the right property
While location does the heavy lifting in your investment property’s performance – owning the right property in that location is critical.
That’s why I would only buy an investment grade property – one with occupier appeal, a level of scarcity, close to public transport and infrastructure and one that gives me the ability to add value and manufacture some further capital growth.
Importantly – your property will need to be suitable for the target market of the area – which you would have identified in your research.
Step 5: Take your time when making decisions
Rushing into decisions before you have had a chance to mull over all the facts is never a good idea, least of all when you’re dealing with property investment.
Real estate investing is really a game of patience, and the wrong decisions can end up costing you.
I’m never in a hurry to find the right property, but when I find the right property I’m in a hurry to secure it – but only after doing my careful due diligence.
As Warren Buffet said: “Wealth is the transfer of money form the impatient to the patient.”
Step 6: Delegate the work to competent people
It’s unrealistic to expect you’ll be able to completely take care of everything yourself as a property investor.
While you may think that hiring a property manager, an accountant or a repairman will be unnecessarily expensive, it’s far better to invest in these people – who will get the job done with less time, effort and cost than you would – than to attempt it yourself and make costly mistakes along the way.
Spend your time productively by hiring reliable specialists to deal with some of the work for you.
Step 7: Don’t scrimp on insurance
I’ve known investors who own property without having landlords insurance and to me, that’s like playing Russian roulette!
It’s a smart move to take out landlord insurance, because it’s your ultimate safety net that will pick up the pieces if something significant goes wrong.
A good policy will pay for malicious damage done to your property as well as for lost rental income if the property is untenable for a period, due to damage by the tenant or another insured event.
Step 8: Don’t buy sight unseen – ever
Never ever buy sight unseen.
That’s not to say that you should ignore all investing opportunities located interstate but if you do, make sure to use the services of an independant local specialist buyer’s agent who will be your “eyes” and ears on the ground.
As I said at the beginning of this article, investing in property successfully needn’t be difficult.
Where many investors trip up is when they make common but costly mistakes.
By following this eight-step process, you’ll hopefully avoid mis-stepping in the first place, and will be a much better position to enjoy a profitable and stress-free experience as a landlord.
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