Your first steps toward property investment

Last updated on November 25th, 2021 at 09:24 am by Bill Tsouvalas

Investing in property is better than savings, it’s better than bonds, and in some cases, it’s better than investing in the share market. The Australian Securities Exchange (ASX) reports investing in property returns an average of 7% over 10 years as per Canstar. If you’ve been edging towards property investment, you may wonder what your next step is – or your first step. Here is a guide toward a successful investment in property.

Look at your financial situation

This is the absolute first step – can you afford an investment property right now? If you have a stable job, good assets and manageable expenses, lenders and brokers will have a hard time saying no to you. Get pre-approval or unlock your home equity With this information, your next destination is a lender or broker. It’s best to look at all options before committing to one. If you don’t have equity in your existing home that you can tap into, you will need a loan. Get pre-approval so you know exactly how much you can spend on an investment property before venturing into the market.

REMEMBER: Don’t apply for loans often. Applications trigger credit checks and affect your credit history.

Set realistic goals

As mentioned earlier, the average return for an investment property is 7% over 10 years. This means financial freedom for some, a retirement nest egg for others and simply income to offset their own mortgage repayments. Know what you want to achieve, and set measurable milestones for each week, month, year, two years, five years and even ten years. That way you know how you’re tracking.

Understand your risk profile with a budget

With all transactions in life, there is risk. How much risk are you willing to take on, even if the potential return is higher? You should know this by looking at your goals. A sure bet is better than a risky move, if you want all-but guaranteed returns. You should budget to know your income and expenses each month and to help you plan for larger expenses in the long term (for example, a fund for emergency repairs.)

A sure fire way to save money is to look at home loan refinancing options, if you already have a home loan that’s at least two or three years down the line. Refinancing to a more flexible or cheaper mortgage product can save you thousands in repayments.

Plan your purchase

Your plan is informed by your goals and budget. You should know whether this is your initial investment, and how you plan to grow your portfolio. You should have an overall strategy to your investment, which include definite criteria to cull the unsuitable properties from the good ones.

Do your homework

Every major purchase you make, you research thoroughly. You should scour the market for suitable properties that fit your criteria, gain appraisals from experts and get all the help you need from outside agents. Know everything you need to know before making a move.

Think of investment like a business

Businesses don’t run on assumptions, they run on numbers. You should think about property investment the same way. Look at the facts, make decisions that will net more money than you invest, and benchmark your progress at every stage. Use accountants and buyers’ advocates to help you through tax, negotiations, and other issues such as negative gearing. After all, investment is good business!

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