Climbing the property ladder is a great way to start investing. Property investment seems easier to understand than many other types of investments but there are a few things you need to get your head around before you take the plunge (especially if this is your first time investing).
Here are 5 things you need to understand before you invest in the property market:
1.What are you trying to achieve?
Are you looking to buy an investment for cash flow? For long-term capital growth? Are you wanting to sell it in a couple of years time? Understand what you want to achieve before diving into the property investment game. Too many people buy an ‘investment property’ because they think that’s all you have to do, but that is not a goal. There are countless other ways to invest.
2.Create an investment plan and strategy
Put together an investment plan and strategy.
- How are you going to achieve your goals?
- Do you need to buy 2 properties or 50 properties?
- How long is it going to take to reach your goal?
Clearly illustrating your plan is going to give you the confidence to take action on the right properties at the right time. It will help you block out all the noise…the boom or bust media being the main one. This will also help you stop chasing the ‘get rich quick money’ schemes. Make the plan, put it into action and stick to it. It will give you the confidence to tread your own path to reach your goals.
3. Understand a great property investment
Location, property type, size, and condition are some of the factors to consider here.
- What makes a great location?
- What is the ideal property type to meet your property goals?
- How much land comes with your property?
- What size is the home?
- What condition is the property in…do you need something old or new?
If you don’t know what a good property asset is, then you shouldn’t be rushing into buying anything. Like all investments, the key is knowledge. The more you know, the more comfortable you can be with your decision. And remember, there is no rush. If you are ever unsure, you can always talk to a professional who knows the answer.
You need to understand how to work out what price you should be paying for a property. This involves researching and learning your market. This means a lot of time on the ground and a lot of time on real estate portals!
Working out pricing is not a science, we are dealing with an open market system, but you need to be careful of paying too much for a property. It may just come back to cost you a lot of money in the long run.
5.Cover the risk.
It’s not going to be smooth sailing all the time with a property, so you have to have financial buffers in place to be able to protect your assets if cash flow gets tight. This might be from a tenant not paying rent, from having some major maintenance issues arise, or from rapidly changing economic conditions as we have seen through COVD-19. Although it’s impossible to see into the future, it’s important to have a plan in place in case something bad happens.
If you would like to learn more about your options or would like to have a chat about potential properties to buy, give us a call and we’d love to help you out.
Want to read more? Check out some of our other posts:
- Best Suburbs In Melbourne To Invest In 2021
- 5 Things To Consider When Buying An Investment Property
- Rentals Vs Airbnb: Using Airbnb As An Investment Strategy
- 5 tips for buying a property in a hot market
Some additional reading: