Whilst it’s great to listen to the advice of others, and we certainly recommend you do (from the right people – we’ll delve into this a little further on), it’s also really important to remember that no two experiences are ever the same. You may have a friend who had an absolutely woeful experience, for any number of reasons, and, on the opposite end of the spectrum, you may have a friend who says investing in property was the best thing they ever did.
In order to set your expectations and avoid disappointment, we say it’s best to assess the prospect of investing with a clear, open mind and make your decision from a more factual perspective.
Rule #1 – Finance
Before considering purchasing an investment property, it’s important to make sure you’re financially in a position to do so. If it turns out that you’re not quite there yet, have a clear and achievable plan in place to get you there. Many people underestimate the value of a good broker, similarly, many people don’t realise that the structure of a loan can vary vastly depending on circumstances so it’s important to do your research and find yourself a broker who is well versed in investment loans, construction loans and debt consolidation.
Rule #2 – Research, research, research
If you’re not tech savvy – start learning or align yourself with someone who is! It is ridiculously easy to monitor the market with no more than the click of a button. It’s also really important to align yourself with a Real Estate professional, someone who is experienced and transparent who will be able to point out the pro’s and con’s of a particular suburb or property. If you’re looking at building or purchasing off the plan, a depreciation schedule never goes astray.
Rule #3 – There is no such thing as the “perfect time”
In an ideal world, we would all own our first home at a young age and be on to our second soon after. Whether you’re barely of legal drinking age in the USA or you’re a little more mature (like a fine wine), we all have to start somewhere and it’s never too late. Don’t let age or the residual pain from prior choices which may have been less than advantageous stop you from investing if your finances stack up and you’ve done your research.
Rule #4 – Be Prepared!
It’s easy to underestimate the level of time and attention which goes into having a property portfolio. Even if you have one investment property and you’ve engaged a phenomenal Property Manager, you need to be clear on the following:
- Have a firm understanding of the potential expenses you as the landlord could incur and be held responsible for
- Be prepared for an economic down turn – if you were no longer able to achieve X amount in rent, could you afford the repayments at a lower rate and hang in there until things pick up?
- Whilst your Property Manager (if they’re doing their job properly) will qualify prospective tenants before discussing applications with you, at the end of the day it is your decision when it comes to who will be living in your home and you need to be armed with the right information to make the right decision
- If you’re not already doing so, be prepared to roll up your sleeves and become active in your financial health. Keep up to date with interest rates and policy changes for investment loans
- Be prepared to constantly monitor the market, not just overall, but keep your finger on the pulse in the suburb in which your investment property is located. The last thing you would want to do is miss out on a prime time to liquidate an asset in your own suburb because the media tells you the market is performing poorly in general. A good example is a suburb located in Perth’s North Eastern corridor which will be on the receiving end a train line – it’ll be great for the suburb overall but how easy to sell is it going to be for the properties which will directly back on to said train line once it’s up and running? Knowing when to call it quits while you’re ahead is just as important as being patient enough to play the long game!
Rule #5 – Protect Yourself
An investment property is just that – an investment! It’s also one of the biggest assets you will ever own. It is for this reason that it is imperative to protect not only your asset, but yourself. The first step is engaging a Property Manager to not only effectively manage your asset on a day to day basis, but also, to adequately market the property to ensure you receive the best possible rent return and a high quality, qualified tenant. The second step is taking out a Landlord Insurance policy, you wouldn’t purchase a car without taking out insurance and Landlord Insurance is no different, it’s all about mitigating your losses in the event that things don’t go according to plan.
Rule #6 – No Risk, No Reward
Unless you win the lottery, you won’t get to where you want to be until you jump in and start making moves. Doing your research and aligning yourself with trusted professionals is key but none of this matters or means anything until you just do it. Every great financial reward or game of monopoly involves an element of risk!