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...
How to buy the right investment

How to buy the right investment

Buying the right investment property is the key to a successful property portfolio. The most common words of wisdom heard from those that do well with their investments are; buy with your head, not your heart; and the profit is in the purchase This is where most investors and especially those new to property investing, go wrong. Most tend to treat buying an investment property just like buying their home, which translates to an emotional buy. When it comes to buying right, this is where most go about it the wrong way too. Ultimately, when we want to buy any other product at the best price, we look at ways to buy from those that need to sell; how we can get it at a reduced price; buy it at wholesale or direct from the producer. Coming to property, most investors look only at the retail end, which in most cases means that they are paying a premium price to begin with. The biggest profit is made at the point of purchase. I know myself and have been told too many times from successful investors to ignore. It surprises me how many new investors make some of the most common mistakes and all too often costly ones. Mostly, at the time of purchase. While, there is a myriad of resources and information available in the market to identify the best areas and spots to invest in, many newer investors tend not to know how to access the right data and use this information in the best way, in order to buy right, and often end up making unnecessary mistakes....
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...
The best way to become a powerful property investor

The best way to become a powerful property investor

Securing a powerful property investment portfolio can be an amazing source of financial security. But when getting started, it is vital that the right steps are followed.   Why are you doing it? Be clear about your reasons for choosing to invest in property instead of other asset classes such as shares. Some do it for the wrong reasons, such as trying to keep up with their neighbours or friends who are investing. Property investing is not a competition.   Understand the risks Just because prices have been growing consistently for a number of years doesn’t mean they’ll go on indefinitely. Growth in value is rarely consistent and linear. Precise capital growth is hard to predict. Sometimes there are vacancies or tenants that default. There are ways to reduce these risks, but they remain a part of investing in property. If the area is in high demand, discounts are virtually non-existent as vendors know they could get the price they want.   Be a long term investor There’s no guarantee that you see growth quickly. While some areas may experience rare short-term surges, the majority of suburbs go through periods of slow to no growth before values rise. Be prepared to hold your property for at least 5 years if you want to make a solid gain. Make sure you have a solid cash flow to maintain your property to avoid selling prematurely.   Learn, learn, learn While you’re building your deposit, learn everything you can about property investing. Buy a few books from a range of authors to get a variety of opinions. Once you start hearing the...