Property investment is one of the most popular wealth creation activities that Australian indulge in. And if you consider setting up a property portfolio like running a business, it can be simpler to run. With the benefit of tax planning, good advice and debt structures, you too can start your property investment portfolio.
Here are some tips to consider.
1. Educate yourself
The key to winning the game is to first know the rules. So it only makes sense to know the rules about investing in property. There are lots of blogs, websites, books and information about property investing, purchasing and selling property. Read, read and read more. You will never run out of things to learn about investing. And don’t forget to talk to the experts – your local real estate agents and other investors. They can be a great source of information.
2. Surround yourself with experts
Almost everyone will have an opinion about property investing. The best experts to surround yourself with are advisors who are qualified to give this advice. Start with your accountant (for tax planning advice), real estate agents, mortgage brokers (like us) and property valuers. If you know someone who is an active and successful property investor – they can be a good mentor.
3. Do your numbers (before you buy)
Buying an investment property can be the second most expensive purchase (after your own home) that you will make. Get the full financials around the purchase of the investment property, including the effect of tax, loan repayments and costs associated with owning an investment property. And then work with your mortgage broker to see if you can afford it. And remember – it is not always about reducing tax. Investment should be about increasing wealth.
4. Buy well
Trying to predict whether a property is in a hot-spot can be the most difficult thing to do. Do plenty of research about the property, the area around it – how far it is to schools, public transport and shops? Whilst most experts will say buy with your head and not your heart, a good test will still be: “If I was renting this property to live in, would I move in?”. If your answer is yes, then chances are so will your tenants.
5. Consider your tenants (or who your target market is)
Like any good business, a profitable business is one which considers who its target market is. The best investment properties are those properties that your tenants can afford to rent, and in the areas that people would live to live in. As a property investor, you should consider who your target market for the property that you are about to purchase will appeal to. After all, as a landlord, you want to ensure that you have a ready demand of tenants for your property. And if your property is in great demand, you will be able to earn good rent with great tenants.
6. Make sure you have a buffer (for when bad things happen)
It also makes sense to have some buffers and risk management in place. For instance, what if your property becomes untenanted for a while? Will you have enough funds to ride this out? Or will you be able to afford the mortgage if rates increased by 1%- 2% in the future. Build in some financial buffers and don’t forget the insurance policies.
Important information: The advice contained in this article is for general information purposes only and may contain general advice. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.