Just like investing in any other asset class, you should do your homework before jumping in to the property market.
If, like most things, you get it right at the start, with careful planning, research and a sound strategy investing in property can really pay off.
Choosing the right property in the right location is a sure way to make your investment really work for you.
So here are some of the basic tips I’ve learnt after 20 years of investing which will help you with property investment.
1.Property Should Be A Long Term Investment
Whilst not an exact science the housing market is generally touted as a 7-10 year cycle. During this period there are peaks and troughs with some relatively stable periods. My observation however is that this 7-10 cycle is only true when looking out over a 50 to 60 year time frame. My experience is that the cycle is probably closer to 10 years.
Picking the bottom of the market is difficult (unless your doing with hindsight, in which case it’s a piece of cake) however by thinking long term the effects of the peaks and troughs are minimised.
In terms of borrowing, being comfortable is crucial (this is one of my most important factors when I develop strategies for people); planning should involve building in potential rate increases, having enough cash flow to deal with tenant vacancies and expenses like rates, knowing your financial goals and having an exit strategy.
2. Seek Appropriate Advice
It makes sense before setting off to buy your first investment property that you get the appropriate advice to make sure that your financial situation is improved. Do your research and speak to qualified professionals. Even with all my years of experience I still engage a group of professionals to do certain tasks for me.
Points To Cover:
1. Taxation and any benefits you are eligible for.
2. Potential capital growth of the investment.
3. Tax Variations – to assist with cash flow.
4. Benefits of Negative Gearing & Positive Gearing. Which one is appropriate for you?
5. Income Tax implications.
6. The appropriate Investment Home Loan.
7. Vacancy rates.
Also invest your own time to become an expert on the marketplace. Understand property values by going to Auctions and Open for Inspections, find out average rental yields from real estate agents and take into consideration any Council plans for upgrades to services or improvements in infrastructure in the area. Get this right and the difference to your investment return could be significant.
Specialise
Choose the one type of real estate asset and become an ‘expert’ in that particular type of investment. Don’t bounce back and forth between different types of property (renovating, developing, holiday homes etc.) By specialising in the one type of property you avoid making costly mistakes that are made during the ‘learning curve’. In addition to this you become more and more accomplished in your chosen area of expertise with each new transaction.
If you have any questions drop me a line and I’m happy to cover them off in another post.
