5 tips for investing

5 tips for investing

Many investors fail to get past their initial wish-list. Whether it be fear, timing, limited support or outright procrastination, lots of resolutions remain just that; a wish-list item which never eventuates.  Planning isn’t always easy, and it’s not all that simple either. Lots of thought needs to go into the why, the how and the when; and that’s before investors even get to the what.  A resolution needs to be clear, meaningful, results-driven and achievable if investors are  to have any chance at meeting their goals.  Here are some initial steps for those who are serious about property investing.   FINANCE — financial discipline is critical to the success of real estate investing. Get clarity on your borrowing power, ideal loan structuring and leveraged amount (i.e. the LVR – loan-to-value ratio). The funds you have on hand will help determine how much and when you can borrow. Without this critical step, there is little point planning anything else in the journey yet. Speak to a knowledgeable finance adviser with a proven track record for investment lending because loan setup is critical at the start.   MOTIVATION – Ask yourself what your motivation to invest in property is based on. Quantify what it is you wish to achieve through property… is it a better financial future with less reliance on super/pension? Is it a specific passive income per annum? Could it be attaining your first home? Or is it about building wealth? Taking the focus off the number of properties or the value of your portfolio is imperative if an investor is serious about an outcome, not just a goal. The real question becomes –...
How to find properties with strong growth potential 

How to find properties with strong growth potential 

If your goal is to create lasting wealth it is essential to have assets with capital growth potential in your investment portfolio.  You need to buy with a goal of creating capital growth. Focusing on cash flow and a positive cash return is a short-term play. Without growth, you’re not going to be able to create lasting wealth for the long-term. You need to focus on the drivers of capital price appreciation. Location – This is the main driver of capital growth. There are many things you can change about a property, including its layout, condition, colour scheme, even the number of bedrooms it offers. The one thing that you can never change is your property’s location. A quality location is important. It ensures long-term demand from a rental perspective, and ensures you have a robust buying market if you decide to sell.  Infrastructure – Infrastructure is a major consideration. Infrastructure means any kind of infrastructure – whether it be transport, industry or commerce – that will benefit local residents. This could be anything from a new train line or expanded freeway, to commercial construction that adds employment opportunities to the region.  Condition – When deciding which property to invest in, you can buy a brand new property or an established property. You may decide to renovate to add value and build equity, or you could buy a new property to access the depreciation and tax benefits. Either strategy can offer price appreciation potential.   Balance – Try and strike a balance between yield and capital growth. Make your wealth creation strategy as passive as possible. This leans towards buying new properties that are low maintenance...
Why high-end properties are not the key to real estate wealth

Why high-end properties are not the key to real estate wealth

It may surprise many first time investors that purchasing well-located lower-priced properties can deliver higher rates of capital growth than properties located in much more expensive suburbs.  In areas such as Perth and Brisbane, for example, you can still purchase well located properties in suburbs with a median house price of less than $500,000 that can achieve greater annual capital growth rates than properties in suburbs with a median house price of above $1 million.  First time investors should take the lead from the large number of people whose wealth has been based on buying affordable properties in well located areas.  There are literally thousands of wealthy people throughout Australia who at one stage in life bought a very affordable home as their first home and then used this as a stepping stone to create personal wealth over the long term. How to buy affordable property; Check if there are any upgrades in affordable areas to local infrastructure such as new schools, shopping centres or transport. New infrastructure can increase the value of properties by making homes in these areas more appealing to buyers.  The best areas to buy affordable properties are locations with high population growth rates. You should target affordable properties in these locations with as much land content as possible.   Make contact with a number of agents to check what type of properties are most in demand in the local area. This will give you an indication of what type of property will appeal to future buyers if you decide to sell.  Check with the local council to find out which suburbs have any future potential...
Building a property savings plan

Building a property savings plan

As property prices rise rapidly in some capital cities, the savings for a deposit on a property often represents a significant chunk of a person’s yearly income. Yet this amount should not dissuade would-be investors! Whether you already own property or are planning your first purchase, buying an investment is an achievable goal. If you’re a first-time buyer… Set a target Putting aside money that could instead go towards indulgences is not an easy task. It’s even harder when you have no clear plan or purpose. People really struggle with savings unless they have a specific goal in mind. Saving needs to be a mind-set. You really need to want to succeed. This alone will help build up your savings. Sitting down with a mortgage broker or financial adviser can increase people’s motivation by giving them a clear understanding of their goals. While five or 10 per cent deposits allow people to get into the property market faster, lender’s mortgage insurance (LMI) can dramatically add to the monthly cost of a mortgage. If you know that saving an extra $10,000 is going to save you $5,000 in lender’s mortgage insurance, that’s pretty good motivation. First-time buyers should be aware that the costs of buying go beyond just the deposit. Legal fees, inspections, stamp duty and repairs all need to be taken into account when saving. For investors, for untenanted properties, an initial vacancy period might also add to the cost. You’re also going to have to pay an agent to find a tenant. Investors who take these issues into account from the start are less likely to be hit...
Auction pitfalls: Vendors be aware!

Auction pitfalls: Vendors be aware!

As a vendor, there are many pitfalls to be wary of before and during a property auction. Here are some common pitfalls to avoid!   Receiving multiple offers before auction Accepting an offer means you are denying any chance for competing buyers to force up the sale price of your home. At the same time, auction day could mean the property is sold for less than what you are offered in the lead up. Offers made prior to auction must be exceptional in price and favourable in all conditions, as buyers are not just purchasing your property – they’re purchasing the right not to compete with the market. It is also important to understand how many genuine buyers you have when considering an offer made prior.   No bids on auction day A good agent will be keep tabs on buyer interest and be able gauge buyer sentiment to determine if it’s going to be a successful auction. Auctions thrive when there is competition for your property and fail when an agent has misread where your property sits within the market.” A well-run marketing campaign should convince prospective buyers to spend more on a property at auction through competition and expectation of ownership. Your agent should be able to advise if you should not proceed with an auction sales method if buyer interest is lower than expected.   A poorly-timed auction date If your auction clashes with a major sporting event or holiday, says Mr McCann, it can seriously reduce the number of prospective buyers at auction. If your property is a family home, an auction over the Christmas...
How to find the best tenants

How to find the best tenants

Tenants are an important part of your investment property succeeding, so here are some tips on getting the best tenants and minimising tenant turnover. Find the right property manager Finding the right team to manage your property is critical. Too many people do property management because they think they should rather than they want to do it. They must: • Have a dedicated property management division. • Have experience and have had previous success with problematic tenants. • Have an agency principal involved in the function of the property management division. • Have a manager that does/oversees inspections. • Has good programs and processes for vetting applications and monitoring rental arrears. Update your property By keeping your property in top condition, you’ll attract tenants who take care of their belongings and property, and it will also keep you ahead of the competition. Ensure property updates suit your target demographic. Set the right price Keep your rental price in line with similar properties in the area or other landlords will gain a competitive edge in the search for good tenants. Your real estate agent should advise you about the current market and how much similar properties in the area are being rented out for before deciding on a realistic price. Always run a credit check It’s a good idea to include a credit check in the screening process as it is usually safer to choose a tenant who has good established credit. Ensure reference checks are being performed Ensure your property manager makes reference checks with the applicant’s previous landlords, who can clarify whether the tenant paid their rent on...