Australian property blueprint

9 Steps to Getting Started in Property Investment

In 2013, the Australian Taxation Office and RP Data released numbers which provided a snapshot on how the current real estate investment market is doing. Less than 8% of Australians, or roughly 1.8 million people, own an investment property. A little over 70% of these investors own just one investment property. The further 18% own just two, 5.5% who own three, 2% own four, a minuscule 0.8% own five and 0.9% own six or more.

Given these numbers, where do you belong? If you’ve been reading real estate reports and magazines to help you prepare for investing in real estate property, worry no more because we will help you begin your journey into property investing.

Click the infographic below to download:

property-investment

 

 

 

 

 

 

 

 

 

 

 

Here are nine steps that will help you start a property investment portfolio:

  1. Clarify what you want to achieve. Know the reason why you want to purchase an investment property? Are you looking for long term capital growth and income to create more wealth or short term get rich quick? Are you planning to build a portfolio of multiple properties or just one? Having more clarity about your end goal will reduce confusion and being distracted by other people’s opinions. This will also save you time looking at properties that match your goals.
  2. Have your personal finances checked. Don’t immediately assume that you can’t afford to invest. List down your basic budget – know your expenses and work out what spare funds you have available. How much can you contribute towards the property purchase on a regular basis? Will this be available weekly, monthly, etc.? Do you have equity in an existing property that you can use for the new purchase or do you have savings or cash available for the deposit and fees? Knowing the details of your finances will give you an idea as to the amount of cash you have available to invest.
  3. Obtain a loan assessment. Getting a loan when investing in properties is also a key step in the process. Knowing your borrowing capacity from a lender and your personal budget will give clarity in your price range that will be a fit for your finances. Loan assessments can be processed directly through the lender or through a mortgage broker. Choose a broker who understands property investing and tax implications. Working with a good broker before applying for an approval will help you in clarifying your purchasing power.
    Tips
    • Find out if you qualify for a loan and for how much
    • Check your credit rating
    • Consider tidying up your existing debts including your home loan
    • Consider reducing your credit card limit/s
  4. Know your goals. By this time, you already have a grasp on your loan qualification, your purchase price range, and your purchasing capability. Five to ten years down the track, what does success look like to you? The next important thing you need to do is to set a commitment when to get started. Financial security is what most property investors’ aim for.
  5. Be aware of your attitude and emotion towards risk. Having a clear understanding of your own emotions and attitude towards risk will help you create a great purchasing strategy. Understanding your tolerance for risk will help you form how much you’re willing to take on over the shorter and longer term. Better choices will be made if you do a thorough research before making any purchase commitments. However, you don’t need to get over analytical when doing your research because seeking more information can be used as a way to avoid getting started.In property investing, research is done to confirm the pricing of an area, the projected rental income, and the demand in both tenants and future resale value. You also need to review your risk insurances to see if you have a sufficient cover. Remember to stick to your budget and price range, avoid distractions and other opinions.In doing your research and due diligence, a good starting point is to:
    • Search online for properties in your price range
    • Look for areas with good rental income and tenant demand
    • Do the areas have good historical growth and/or potential future growth
    • Complete a cash flow budget on each property, before and after tax
  6. Know your costs and fees. Purchasing a property involves a number of various fees and charges. You will have costs associated with the purchase as well as ongoing charges. Purchase costs will include Government stamp duty, registration of transfer, conveyancer or solicitor, searches, adjustment of council rates, strata fees etc.The purchase costs need to be budgeted for in addition to the purchase price and any deposit required by your lender. Ongoing charges will include items like, property management fees, insurances, maintenance/repairs, council rates, sewer, water rates, land tax etc. Explore the costs and income differences between buying a new property (including house and land packages), compared to an older established property.
  7. Have your purchase strategy ready. An ideal purchase strategy should support and be in line with your goals of growing your portfolio to a point where it’s producing the growth and or income you’re aiming for. This strategy should serve as a structure that will help you in managing your resources (cash, capital and time), and risk and control for you to stay in the game. Your purchase strategy should give you the best chance of achieving a great result and having an enjoyable experience.
  8. Be well-informed. Make the right investment choices by using resources and tools that can help you make an informed decision. Avoid get rich-quick schemes and property spruikers. It is a given fact that there are tried methods to research when buying a property, but still no one can make guarantees as to how the property will perform in the market. Having the right attitude towards short term or long term property investments will improve your ability to be flexible in managing the investment process.
  9. Make sure that you stay focused. Keep in mind that property investing is strictly a business decision. Never think like you are buying a home for yourself to live in.

Tips

  • Know what goals you want to achieve
  • Set a completion date for your goals
  • Identify the milestones that needs to be accomplished in reaching your goals
  • Identify and seek professional help where needed
  • Don’t guess, take short cuts or compare yourself to others

That overwhelming feeling when you’re starting something new is normal. Learning the substantial process of property investing will challenge your patience and management skills. Understand that this is normal when learning something new. Education, practice and having a good support team around you will make the process easier.

Never give up! Imagine that in 10 years from now, buying the right properties which are a fit for you, you could be sitting back while feeling very happy because you are financially secured. You’ll even feel proud that you bought properties that may have more than doubled their values while your peers and everyone else wished they’d bought back in the day. Call Properties4U now!

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