Investing in property, when done correctly, can lead to a long-term investment portfolio that yields incredible results. A balanced portfolio of passive income (the kind that ticks into your bank account without you having to do much work) and capital growth is the key to achieving the lifestyle balance that evades most people who put their nose to the grindstone.
If you have been watching from the sidelines and wondering if investing in property is the right move for you, we have the steps you need to put in place to make that investment count.
Five Top Strategies for Investing in Property
1. Financial Advice
You need to know your borrowing power, that way you get an accurate read on what a lender will be able to give you the green light on. Property investment lending is quite different to when you’re purchasing your own home, especially if your home can be used as equity to help give you a head start. As well as equity your financial advisor will take into account your personal financial circumstances and the available deposit you have to put down. All these factors will give you information on whether investing in property will work for you plus how much you can spend on an investment.
Now that you are armed with the figures it’s time to look at the facts. You need to start thinking like a business and that means having an overall vision (or mission) for the future of your investment.
What are your intended outcomes? Is this:
- The start of a larger portfolio of investment properties
- To earn additional income to pay off your mortgage quickly
- A side income for your personal use
- To finance your children’s education
- A nest egg to sell down the track for some retirement money
- A family future investment
Knowing what the purpose of your investment property is will help determine what kind of return you need and how quickly. A tax advisor or financial planner will be able to help you with all the details around this, especially how much you can gain back in your taxable income for property depreciation. You need to know now if your future goal is achievable, so be clear on what you want.
Having a budget in place is key to making your investment property work for you and not the other way around. Once you sort out a viable balance between costs (upfront and ongoing), tax breaks, and income, you can get a genuine feel for what your new income flow will look like and what your final figures might be.
Again, it’s best to get advice from a professional in all these stages, the amount you spend on getting that expert help will well and truly pay off in the long run.
It’s not just the upfront payments of the property, which can include items like stamp duty, conveyancing and building inspections, you also need to factor in ongoing costs such as mortgage repayments, interest, body corporate fees, government taxes and rates, utilities like water and sewerage, insurance, property management as well as repairs and maintenance. These will vary property to property and council to council, so you need to get a flexible range of figures to cover likely scenarios starting out.
When you find the right property remember to conduct your due diligence, spend the money on pest and building inspections and get the full scope of fees and rates for the building and council to add to your budget to get it as accurate as possible before you buy.
While no one can ever know for sure what a property’s annual income and long-term growth will look like, experts can forecast trends and create some predictions based on current and long-term markets in the surrounding areas so get your hands on current property market data or find a professional who can pass on these details.
This is no time to rush. Patience is so important when you are buying an investment property. Unlike a home purchase, you are probably more flexible about key features and must-haves which gives you a wider range to choose from, however, potentially more research to get to the bottom of the best deal.
Supply and demand are big factors. Look for good surrounding infrastructure, (schools, public transport, shopping centres) as well as factor in job security, location and neighbourhood safety.
5. Pre-approve Your Loan
Now that everything is in place and you’ve completed your final checks it’s a smart move to have your loan pre-approved before you go to an auction or even begin inspecting properties. This allows you to know just how much wriggle room you have and if you find that great deal you can move on it quickly.
It’s a crucial step if buying at auction because if you are not able to obtain the loan, you’ll lose your deposit.
Once you have a base understanding of what works and how-to, then anyone can get on board with investing in property.
Parley Property Advisory