If you have made the decision to invest in property in the near future, here are five things you should do to prepare.
1. Research and learn
In order to be a savvy investor, it is important to understand how the property market works. Before you do anything else, take the initiative to educate and inform yourself. Alongside researching what type of property would be best for you and what areas are likely to experience capital growth in the future, take the time to learn about the property market in a broader sense so you get to understand the ins and outs of the real estate market, current market happenings, what’s involved in investing and the tax implications of owning an investment property, among other things.
Educating yourself is not just important when you’re starting out – it should be an ongoing task you practice in order to keep on top of what’s happening in the market. There are so many resources out there to help you do this – you can read investing books, magazines and the property and finance sections of daily newspapers, make use of reputable online sources, attend investing seminars and speak to other investors who might have some lessons and insight to share with you.
2. Get your finances in order
Before you make such a big investment, it’s important to get your finances in order. You should know exactly what you have coming in and out of your accounts and find out if your finances are best structured to manage an investment. Once you know what kind of property you would like, or even have a few potential properties picked out, you should then calculate the realistic costs of owning the property to work out if it is a feasible investment. You should research all costs and determine if you can both afford and maintain it in line with your investment strategy.
3 . Enlist the help of professionals
Property investing can be complex but there are lots of professionals whose very job it is to help you on your way. To help sort out your finances you should consult with an Accountant or Financial Planner. A Mortgage Broker can help you navigate the murky waters of home loans and help you find the best mortgage to suit you and your finances, both now and into the future. Other professionals who can help you with your investment include a Property Manager, Building and Pest Inspector, Insurance Broker, a Solicitor and a Quantity Surveyor.
4. Sets some goals and devise a strategy
While some people think investing is as simple as buying a property and watching the money flow in, unfortunately it’s not always as simple as that. As an investor, it’s important to first set some realistic goals. Why do you want to invest in property, and what do you want to get out of it? How long will you hold on to it for? What do you hope to achieve from your property in the next year, the next five years, and so on and so forth? In preparing to invest you should devise a smart strategy to help you achieve these short and long term goals. An Accountant or Financial Planner will be able to help you identify some realistic goals and put a strategy in place for you to work towards.
5. Carefully screen potential investment properties
If you’ve gotten to the point where you’ve found one or more potential properties you’re interested in, it’s important to check on a few things before you sign on the dotted line. You should check on zonings and other council or strata restrictions that may apply. In addition to doing your own research you should confer with a Property Manager as to what rental yield the property might bring in per week. It’s also important to get a building and pest inspection to ensure there’s no hidden faults that may cost you down the track.
If you are deciding between a few properties, it’s important to compare realistic figures for each to assess which will get you the best return. Calculate outgoing expenses such as water, council rates and property management fees, among other costs, and speak with a Quantity Surveyor to get an estimate of the depreciation deductions available for the property.
You should also research the suburb in depth to determine if the property is a suitable investment. What percentage of residents are renters, what is the vacancy rate and average number of days on the market, what do other similar properties in the area rent for, does the property suit the target audience or demographic for this area, and what is the capital growth in that area?
It’s important to be prepared and make an informed choice when purchasing an investment property.
Prepare with these above suggestions and you’ll soon be well on your way to becoming an informed property investor.
