Investing in property has become the national pastime. We talk about it at barbeques, around the water cooler and in online forums. We can’t get enough. And for good reason – it’s an investment we can touch, have some basic understanding of and everybody knows someone who ‘made millions in property’. We don’t mean to sound cynical as, done correctly, investing in property can be a strong facet of your financial freedom plan. Here at savings.com.au we’re all about financial freedom, so naturally we think property investment deserves some airtime.
Here are 5 tips to get your property investment journey off on the right foot:
Know your why
The very first step is figuring out exactly why you want to invest in property. What’s your long-term game plan? Early retirement in Bali? You’re going to need multiple cashflow properties. Or are you just looking for a supplemental income after you turn 65? If that’s the case, and you have a few years until you retire, you might want to focus on capital gains. Each plan has a different strategy, so define your why before you start thinking about your how.
Start at the local library. There are literally thousands of books on the topic of property investment. If your local branch doesn’t have the books you want, request an interlibrary loan. There is no need to spend thousands on your property investment education. With plentiful blogs on the topic, plus online forums and the Australian Property Investor magazine, you can find out everything you need to know for low or no cost.
Construct your team
At the very least you’ll need an accountant, conveyancer or solicitor, property manager, and a builder you trust to call on in case of emergency.
Tip: Even if you plan to self-manage your investment property, pay a professional property manager complete a pre-purchase rental assessment. For a nominal fee you’ll get the opinion of an expert in your rental catchment area, who’ll be able to point out the strengths and weaknesses of your potential purchase.
Get your structure sorted
Before you make an offer you need to sort out your ownership structure. Whether you plan to purchase as an individual, as part of a partnership, trust or via a self-managed super fund, discussing your plans with a professional is vital. Your accountant should be able to point you in the right direction.
Have a plan for reducing debt
It’s prudent to have a debt reduction plan in place if you are borrowing to invest in property. Aim to get your loan to value ratio (LVR) under 80% as quickly as possible, to remove the lenders mortgage insurance and/or low deposit premium from your loan. This will see an instant increase in your cashflow.
Property investment can be a great tool for building wealth. By focusing on your goals from the outset, you’ll be able to build an investment strategy that gets you where you want to be. Take your time to get educated and surround yourself with professionals, and you’ll be a step ahead of your competition.