When it comes to investing in bricks and mortar you don’t have to be a property whiz to get yourself into the market. It’s also not necessary for you to be extremely wealthy and it doesn’t matter what age you are. Really all you need when entering the world of real estate is finance for a deposit, the right attitude and a bit of inside knowledge. This is the perfect guide if you are a first time investor looking to kick-start your hunt for that ideal property. Read on and learn the following tools and tricks that will give you a leg up on the competition.
When it comes to investing in property, finding the most suitable home or apartment for your requirements, at the best price, should be your number one priority. This can be tricky as unlike shares, property prices are intangible and can be difficult to price, especially for a first time investor. Our advice is to talk to local real estate agents in the area you intend to purchase and do your research using property information sites such as Realestate.com, SQM Research, CoreLogic RP Data and so on. Remember that to maximise capital you need to buy a property that represent fantastic value for money in a suburb with potential for growth and access to services. As canny old investors say, “You make your money when you purchase the property, not when you sell it”.
Also double check the property you’re buying isn’t a dud. Have a building and pest inspector go through it with a fine tooth comb to avoid any major speed humps further down the track and ask the agent if there’s anything regarding the structure of the abode that should be disclosed.
Can I settle my mortgage payments on time? Have I accounted for additional maintenance costings? What are the management fees and how much do I have to fork out in tax are all questions you should be asking yourself when considering a specific property. Cash flow is king and owing an investment property can be expensive. By taking note of all the necessary payments involved you can better discern if the property in question is a real winner or a financial black hole. Our tip is to also calculate all costings after tax so you can get a better idea of just how much you’re going to be spending.
If you think that the first property you purchase is going to be the answer to all of your problems then you’re setting yourself up for a let down. Not to worry though, as a lot of people fall into the trap of holding out for that one home or apartment that they thinks going to make them a million dollars. The truth is this is rarely the case. Here’s a reality check for you if you plan on flipping a property for a profit; focus on securing smaller properties that you can work on and resell over the course of a couple of years. You’ll then be able to refinance and borrow against them to leverage your next purchase instead of wasting time (and money) searching for that elusive perfect listing that just may not exist.
It’s also important to note that buying with the intent to sell again for a profit is hard work even for experienced investors. Our advice? Purchase something you can lease first up and wait till you’ve got your toes wet before you take on such a big commitment.
This somewhat ties in with our previous tip. By starting early and accumulating a number of properties over time you’ll be in an advantageous position as you ride out the property cycle. Of course you still need to look for a great location and only buy when the market is flat as opposed to when it’s booming. But if you can build up a solid portfolio early on rather than trading in the same markets continuously you may be able to sell decades down the track and enter retirement with zero debt and plenty of leftover cash in the back pocket. Just ask any experienced investor if they’ve ever sold a home prematurely that would now be worth a motza. I guarantee they’ll have a story to tell about the one that they let get away.
There are some seriously great free sites for researching property in Australia at the moment. By using them you can find out everything from capital growth trends, recent sales, vacancy rates and even just how “cool” a certain suburb is. This is a godsend for a first time investor because it means you no longer have to enter the market with headlights switched off. DSRData.com, SQMResearch.com, MyRealEstate.com and OnTheHouse.com can all give you the confidence you need to go forth and conquer the property investment game.
The services of a reliable property manager are invaluable if you’re a first time investor. Not only will they have a better understanding of the rental market plus access to a tenant’s history; they’ll also take care of all the menial tasks that would otherwise put a burden on your time. You will have to pay a management fee, however this is often fairly priced in a competitive market and tax deductible. By using a property manager as another tool in helping you climb the real estate investment ladder we guarantee you’ll get there quicker than those that decide to DIY manage.
Stay positive and keep on fighting the good fight. The property investment world can be rife with frustration and takes time to get a handle on. Hopefully with our help you’ll be well on your way to a portfolio you can be proud of in no time at all.
1. Peter Koulizos, 27th October 2015, “6 Tips for first time property investors”, (http://www.realestate.com.au/advice/6-tips-for-first-time-property-investors/)
2. Tim Parker, 8th September 2015, “Buying your first investment property? Top 10 tips”, (http://www.investopedia.com/articles/investing/090815/buying-your-first-investment-property-top-10-tips.asp)
3. Anouska Linz, Yourmortgage.com, “Tips for becoming a first time property investor”, (http://www.yourmortgage.com.au/article/tips-for-becoming-a-first-time-property-investor-190509.aspx)
4. Onpropery.com.au, “8 Best free sites for property research in Australia”, (http://onproperty.com.au/free-sites-for-property-research/)
5. Glen Spratt, “Our top 10 tips for buying an investment property”, (http://www.mortgageport.com.au/information-and-tips/our-top-10-tips-for-buying-an-investment-property/)