Out of all the decisions that property investors have to make, that initial decision to take the plunge and purchase your first investment property is perhaps the most difficult.
First time investors often hesitate, waiting for the right moment to enter the property game but struggling to know exactly when that is.
Despite any concerns potential investors may have, it is important to know that their are long-term rewards.
It is also important to acknowledge that property as an asset class plays a vital role. Statistics from the Deloitte Australian Mortgage Report for 2018 show that Australians hold 52 per cent of their wealth in housing.
If you are considering if now is the right time for you to purchase your first investment property, here are a few things to keep in mind.
Ensure it is a smart decision, financially
Take a step back to consider your circumstances and how they are likely to change over the lifetime of your investment.
Are you in stable employment? Do you have any debt? Do you have savings set aside for any sudden loss of income?
Involve a trusted financial planner and talk budgets and investment strategies to ensure you are making an educated financial decision.
Consider that you will need enough to not only cover the deposit, but other expenses such as conveyancing and legal fees.
Now that you’ve decided that you’re in a financial position to take the leap and purchase your first investment property, it’s time to consider exactly how you’ll put your plan to action.
Set yourself goals
It’s a good idea to set yourself some manageable goals and create an investment plan.
Think about what you want to get out of your investment and what you are going to do to ensure it is successful.
Do you intend to use the extra income to aid your retirement?
How much do you intend to borrow?
What type of property are you looking for?
It’s important to do your research of the property market in order to set achievable goals and ensure you are purchasing in a strong growth area.
Remember that property investment doesn’t come with a guarantee for quick profit and it can take many years to see any rewards.
Assess your equity
If you are making mortgage repayments on your own home, you may be able to use equity to purchase your first investment property.
Equity is the current market value of your property minus what you owe to the lender.
As you make payments towards your home loan, your equity will increase and can be used to undertake renovations, purchase shares or even more property.
If you have a mortgage and have been making mortgage repayments for some time, you will have accumulated equity. This can be tapped into as a way of easing yourself into the property investment game.
Research, research, research
The key to a successful investment property is choosing the right one.
While this may seem obvious, many beginner property investors dismiss the importance of conducting area research prior to selecting a suitable property.
Consider the risk involved in certain suburbs. Does the area depend on an industry such as mining which fluctuates and could alter housing demand? Does the area have a high crime rate? Don’t forget to think about environmental risks such flood or bushfire prone areas.
Determining if you are ready to invest in property is a decision not to be made lightly.
Property investment is a long term commitment and involves an element of risk. For this reason, it is important to have a good understanding of your personal financial circumstances and involve professionals to offer their advice.
By undertaking the necessary research and continually remaining informed about the property market, investors can improve their chances at achieving the desired results and give themselves a better chance of long-term success.