Starting out as a first-time property investor is rather like starting anything new: it can be a challenging and an enlightening process. Because you will be investing your hard-earned money in a substantial asset, you want to know that you’ve ticked all the boxes and done as much as possible to ensure your residential property investment will be successful over both the short and long term. We’ve put together the following checklist to help guide you on your journey, from aspirational property investor to owning a successful property portfolio.
Have The Right Frame Of Mind
You might be surprised to learn the reason most first time property investors fail. It’s not that they choose the wrong property or get into financial difficulty – it’s actually that they make no decisions at all. They are so crippled by indecision and hesitation (for example, always waiting for the “perfect time” to get into the market) that they never actually get around to buying a property. Experienced property investors suggest that while it’s natural to be cautious, it’s sometimes necessary to just trust your research and purchase a property, as long as you have done all the necessary due diligence on the investment and ensured that it meets your financial goals. You don’t want to end up kicking yourself for missing a great opportunity just because you weren’t quick enough to make a decision.
Do Your Homework
It’s always a good idea to do some research into the property market if you’re a first time investor, although it will probably not take as long or be as much effort as you might first think. Just by reading news for the local property market or by following a blog from a professional investor you can usually get a good understanding of the current climate and outlook for the type of property you might be targeting. These days property research is easy to find online, and even by using sites such as Realestate.com.au and Domain you can get a good indication of prices, as well as information on up and coming suburbs or inner city hot spots for residential property investment opportunities. Keeping in touch with current affairs, including financial data such as interest rates, is also useful for developing a broader picture of the current and future state of the property market.
The other thing you should remember about property investment is that it is unlikely you will become an expert in the market overnight. Sometimes it can take a while to master the nuances of property and all the aspects of successful residential property investment. You can learn on your own through extensive research, however finding a professional property investment company who can provide local market knowledge, trends and experience can help to bypass a lot of work and time. Don’t forget – there are no stupid questions when you’re first starting out so be curious and get as much help as you need.
Be Financially Prepared And Set Goals
Being financially prepared to start a property portfolio will make all the difference between laying solid foundations for future success or creating a potentially disastrous scenario for yourself down the track. Being prepared can mean as little as ensuring that you are financially capable of servicing an investment loan, including the deposit, as well as any ongoing maintenance and repair bills. It is also a good idea to factor a contingency plan into your financial plans for any emergencies or loss of revenue due to unforeseen circumstances.
Working out your assets, debts and current revenue, and having all relevant documents handy will help you set goals for yourself, as well as help your bank or other lender when it comes time to discuss investment loans. No one wants to go into an investment without having a firm goal in mind at the end, and most professional investors suggest that it is sensible to create a 10 to 15 year plan that should include “checkpoints” for reviewing your investment and a contingency plan in case your circumstances change for any reason.
Another good property investment tip is to use some of the online calculators that are available online that can help you determine a range of factors such as loan repayments and mortgage costs. These can save you a lot of time when you are looking at purchasing property and will give you an indication of what banks will expect from you as well as the likely costs involved.
In Part 2 of our checklist we will look at some of the practical matters of property investment, including finding the right property, becoming a landlord, buying more than one property and knowing when to sell your investments.