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 be successful.
We're still at the early stages of this property cycle with a number of years of strong property growth ahead, meaning new property investors still can get into property and take advantage of a rising market as long as they understand and follow the right steps.
Is the property investment is a long-term process – not just an event of buying a property.
Many naive investors think buying a property and putting a tenant is a "strategy" - it's not an investment strategy.
However, 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 investment plan.
Most properties are not what I call investment grade and don't deliver wealth-producing rates of return.
Attaining wealth doesn’t just happen, it’s the result of a well-executed plan.
Planning is bringing the future into the present so you can do something about it now!
When you have a Strategic Property Plan you’re more likely to achieve the financial freedom you desire because we’ll help you:
- Define your financial goals;
- See whether your goals are realistic, especially for your timeline;
- Measure your progress towards your goals – whether your property portfolio is working for you, or if you’re working for it;
- Find ways to maximise your wealth creation through property;
- Identify risks you hadn’t thought of.
Strategic investors invest for capital growth because they 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 job 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 from the impatient to the patient.”
Step 6: Delegate the work to competent people
It’s unrealistic to expect you’ll be able to take care of everything yourself as a property investor.
That's why successful investors start by engaging a property strategist – one who can deliver a holistic approach to their investing.
But to secure your financial future you’ll need much more than just a property strategist or a buyer’s agent.
Metropole offers a 360° holistic approach to ensure you Grow, Protect and Pass On your wealth.
We customise a solution to meet your specific needs through a time-tested 360° system for acquiring wealth and helping beginning investors buy their first property, experienced investors add to their portfolio and sophisticated investors manufacture capital growth by becoming property developers.
It's just too hard to do it all on your own. Property investment is a team sport.
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 independent 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 misstepping in the first place and will be in a much better position to enjoy a profitable and stress-free experience as a landlord.
