So you have decided to invest in property, well done. Did you know that the act of Deciding is the second hardest part of investing? By far, the hardest part of investing is taking action or Starting.
Join us as we look into how you can get started in property investment.
Property Investing starts with education first and foremost. We’re not talking about buying every book you can find, or attending every seminar or even subscribing to every website you can find. You’ve probably already done those things anyway. What we’re talking about is educating yourself and consciously improving yourself. The more you can do to educate yourself the better you become will translate into the results you see with your property investing. It’s easy to get things right when the market is growing but when things are tough, you learn a lot about yourself. Find out about who you are before things get tough.
The next part of investing you should tackle is the subject some people feel uncomfortable talking about but it is essential to understand and control if you want to be successful.
Money is an integral part of property investment. To build a property portfolio, most people will need the assistance of a Lender to get the money they require. Borrowing money from a Bank will expose you to a new way of thinking about money because every Lender has a unique set of Credit Guidelines based on what they are prepared to lend. These rules are designed to supply to the lender particular types of clients and particular securities located in suburbs previously identified using postcodes. You should be aware of these guidelines so you can choose a property that the Lender will accept and avoid disappointment.
Unfortunately, following the banks criteria is something you will have to get used to. Any Lenders guidelines will have a bearing on the type of property you choose, be it a 2 bedroom apartment or a 4 bedroom standalone house. Remember, you want their money so you will have to supply security that they will accept.
This relationship between finance and property can be explained very simply if you think of an amusement park. Inside the amusement park is a variety of rides, each with its own level of enjoyment. Property then can be likened to the ride while finance can be said to be buying the ticket for that ride. Without the ticket you simply can’t get aboard.
In case you were wondering, the price of the ticket is irrelevant. Getting on the ride and staying on the ride is far more important than the cost of the ticket.
Based on that, it’s wise to find out how much you can borrow before you start looking. This is called a pre-approval and is the Banks way of saying they will lend you, as an individual, a certain amount of money. Of course, you still have to provide them with a property that is acceptable to them for security under the conditions outlined in the pre-approval, before they will give you the money.
For example, if you asked the bank whether you could buy a 4 bedroom house for $500,000 and they gave you a Pre-Approval, the loan approval wouldn’t be valid if you came back with a contract to buy a Studio apartment for the same amount.
However, knowing you can borrow will give you confidence to start looking at property seriously. You may have to be quick about it though as Pre Approvals only last for 3 months generally. Each person will have their own unique loan limit so each one can look at different levels of property. The more you can borrow the more options you have.
We recommend using the services of a Mortgage Broker because of the access to a variety of lenders. It’s easy to fall into the trap of using your own Bank but take the time to go through your circumstances with a Broker. The results may make a huge difference to what you can do as opposed to what you think you can do.
After finance, property knowledge becomes important. This is where you create your methodology for selecting properties. How will you decide if one suburb is better than another? What criteria will you use to make decisions easier? Researching the demographics of different suburbs can be a time consuming task but there are dedicated websites to assist in this regard. The question though is where should you start. Given how complicated property selection can be, it’s not surprising that a number of new investors buy property close to where they live simply because they are comfortable with that area. This type of “up close” methodology can be deceiving and stunt your wealth creating ability.
Research can be very rewarding but there are more efficient methods to find out what you need to know. Find someone who already knows what you want to know. For example, Property Advisors are a valuable resource when starting your property investing journey.
Learning from experienced people is a great way to build your knowledge base until you have the confidence to do it by yourself. Of course, you don’t have to do it by yourself at all. Many investors find that using Property Advisors is the most efficient way of keeping up with those suburbs that have a strong upside. This is especially true if a Value Criteria is the primary method to determine those areas.
Starting out in property investing can be very exciting. Getting bogged down in tiny details can sap your enthusiasm very quickly which is why it’s critical to gather a team of professionals who can guide you through the smoke and mirrors using a successful, long term strategy.
Let us help you gain some clarity on investing by attending one of our education events. You’ll be surprised at how enjoyable property investing can be when you have the support of experienced investors.
After all, Investors Direct is the home of property investors.