When you first start out there are so many opinions about how to do it, where to start and what’s the most important that it can be very confusing for a beginner. Everybody seems to have tips for property investors, whether they are investors or not! Things like taxation benefits, cash flow positive properties or capital growth properties. Follow along with us as we make it easy for investment beginners to understand how to invest in property.
Planning – The most common mistake property investment beginners make is to rush in and start searching for properties, thinking they have to buy something before they are all gone, or at the very least, before the price goes up. What tends to be missed is that the most important part of investing lies in the foundation. Any builder will tell you that you have to have a solid foundation on which to build. The same applies to your investment journey. Before you do anything it’s wise to understand in your own mind why you are investing in property because once you do understand you can move forward with confidence. So before you buy your first investment you have some thinking to do and the more time you spend now, getting clear on your reasons for investing, the stronger your foundations will be.
Budgeting – A budget is a great way to start understanding your financial position. It’s a good idea to learn how to understand and control your money first so you know where it’s going before you start allocating it to areas you may not be sure of. In fact, a budget will clarify if you have money available to support your first investment property. It will also identify any areas where you could cut back to improve your savings for example. Contrary to popular opinion, investment properties are not a set and forget asset, you will have to learn to be orderly with receipts and expenses so the experience at Tax time is a pleasant one.
Borrowing – the next step is to confirm your borrowing capacity. This is best done through a Mortgage Broker which may surprise some people but the reasoning is quite simple. A Mortgage Broker has access to lots of different Lenders who can meet your specific needs. Most property investor beginners go to their Bank of choice and believe they can negotiate a low rate. In their eyes this equals a good deal. The trouble is, money, not the interest rate, is the primary essence of a good deal and a Bank can only ever provide you with a limited amount of money. The money is determined by their Credit Rules and lending capacity calculators so all they have is the rate. Brokers on the other hand have access to numerous Lenders that may provide more money than your own bank is capable of. Investing is about having money. Money to buy property and money to hold property. Compromising on having money because of the interest cost is a lesson that must be learnt early on. The more money you can borrow means the more of your own money you can hold on to.
Assemble a Team – Have you decided on who is going to help you to build a property portfolio? Are you going to assemble a team of experts or will you try to do everything yourself? Doing it by yourself will save money in the short term but paying for the advice of experts will pay off in the long run because they have the experience, knowledge and skills to help you avoid any mistakes. You’ll need a property advisor, a Mortgage Broker, a Financial Planner and a Solicitor or Conveyancer. All of these people make up your team. They will provide the experience you haven’t built up yet. Understand though, that you will have to pay them.
Buying – Only after the previous steps have been completed successfully should you start seriously looking at buying something. Speak with experienced Property Advisors who can follow the property investment strategies you have agreed on with your Financial Planner. Beware of the Real Estate Agent when you are looking to buy. Do not rely on the Agent to educate you on whether a property is investment quality or not. The Agents one and only job is to sell the property for the Vendor at the highest possible price. Your job is to identify the location and type of property to look for prior to organising an inspection on anything you think is suitable. Of course if you have a team behind you they can advise you on the ways to pinpoint suburbs that meet the important Value Criteria.
At Investors Direct we value our clients by educating them on the finer points of being a property investor. Why not call us today and find out why Investors Direct is the home of property investors.