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 –...
Will my property drop in value?

Will my property drop in value?

There is an Australian property crash coming. That’s what several economists and property experts would have you believe — but what would this really mean for your property portfolio?   Every few weeks another report is released about a property bubble in Australia and the inevitable market crash it will bring when it bursts. But are these predictions correct and should investors be worried about their portfolios? How do you handle a drop in property value — is it best to cut your losses and run or should you ride it out and hope your investment returns to form?      Will Australian property values fall?    Much like you can find a million stories on the next property hotspot, you can find a million stories on the Australian property bubble. The bubble, whether it exists and if it’s going to burst soon, is the topic of much contention between economists, property experts and investors. But is it as big, and as realistic, as the big doomsday predictions would have you believe? There can be no denying that some areas in Australian capital cities appear to be reaching oversaturation. Sky high prices and large developments nearing completion in Sydney and Melbourne have been the catalyst for these debates since 2016. But in terms of a crash which would send all Australian property prices plummeting, that’s harder to believe. Rather than a property bubble bursting, the result would more accurately be a correction of inflated prices which have grown at an unsustainable rate and would only affect those with property directly in these peak zones. But even outside a possible bubble pop,...
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...
Identifying the drivers of capital growth

Identifying the drivers of capital growth

In this mix, the undeniable metric that should be of most importance to investors is capital growth. And although capital growth may be another overused term in property investment conversations, it is essential that it is understood so risks can be reduced and outcomes maximised. There are many reasons people choose to invest in property, whether for the positive and negative gearing benefits, rental returns or even due to the perceived safety in investing in bricks and mortar. Looking at the Australian residential housing market, we can see that it has grown by 147 per cent over the past decade and 10.2 per cent in the past 24 months alone. In order to make sure investment outcomes are maximised when it comes to selecting a property, it’s important to understand what key driving factors have underpinned this growth to date. There are key driving factors that have influenced the buoyant Australian residential housing market over the past decades of growth, and they can be broken down into four categories.   Drivers creating demand It’s important to understand what drivers are creating demand. If you were to look at building approvals, are they growing at a slower rate than the population? If so, this can show that there may be an undersupply of property in this area.  Government influences As rules, regulations and grants can change at any time, government influences make up the second category of key-driving factors of capital growth. This can include government grants, building and stamp-duty saving incentives and supporting infrastructure programs. Economic factors Economic factors, such as employment and income opportunities in a given area, as...