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1. Get the core principles right first<\/span><\/h2>\nYou\u2019re not a multi-millionaire property mogul just yet, and while it\u2019s nice to dream, it\u2019s also essential you keep your feet on the ground when you\u2019re starting out.<\/p>\n
Many beginner investors try to over-analyse or time the market, thinking they are armchair experts when in fact they are operating well outside of their wheelhouse.<\/p>\n
Instead, focus on the simple, basic questions.<\/p>\n
\n- What is your property investment strategy? Capital growth (my preferred strategy or cash flow (where many beginners start and that's why their investment journey falters.<\/li>\n
- What is the best entity in which to buy your property?<\/li>\n
- What is your budget, your monthly spare cash flow, and your risk tolerance?<\/li>\n
- Which areas are likely to outperform in the long term?<\/li>\n<\/ul>\n
2. Accept that the perfect deal does not exist<\/span><\/h2>\nInstead, set your sights on the best deal possible for your circumstances, with your budget in the current market.<\/p>\n
Otherwise, you\u2019ll become paralysed by inaction as you constantly search for something better, and we all know that if you keep doing nothing you\u2019ll get nowhere.<\/p>\n
As long as the property meets your investment criteria and represents a sound value in the current market, take the steps towards buying it \u2013 or you risk being in \u201cresearch mode\u201d for years.<\/p>\n
The perfect deal is a myth, so look for a good deal because you make your money\u00a0when you purchase your property by buying \"the right property\" - not by\u00a0buying it cheaply.<\/p>\n
3. It\u2019s not a race to the bottom<\/span><\/h2>\nCheap properties that command relatively high rents might sound enticing, but these tend to be located in poor capital growth suburbs or in lower socio-economic areas and you should be wary of the potential pitfalls.
<\/div><\/p>\nYou\u2019re more likely to attract tenants on low incomes who might struggle to pay rent, and crime and antisocial behaviour is often higher in these suburbs.<\/p>\n
That doesn\u2019t mean you have to invest in million-dollar properties in sought-after areas, but do stick to middle-income, family suburbs, even if you\u2019re looking for a bargain<\/a>.<\/p>\nAffordability pushes up house values\u00a0 - but that doesn't mean you should buy cheap properties.<\/p>\n
It means that people with higher-paying jobs can afford to buy new homes or upgrade their homes and areas where wages growth is higher than average experience capital growth that is higher than average.<\/p>\n
So that's where you should be looking.<\/p>\n
Leave the slums to the slum lords!<\/p>\n
4. Have a slush fund<\/span><\/h2>\nSmart property investors don't just buy real estate - they buy themselves time by having financial buffers in place to see them through the cash flow ups and downs of running a property investment business.<\/p>\n
Appliances break, accidents happen and tenants go AWOL and leave you in the lurch.<\/p>\n
Often you can\u2019t predict these things, and Murphy\u2019s Law is they\u2019ll always happen when you\u2019re least able to afford them.<\/p>\n
Don\u2019t rely on the credit card or mortgage redraw to cover these costs, and pay hefty interest in the process.<\/p>\n
Always, always<\/i> keep afloat for emergencies and repairs, ideally in a separate account so you can\u2019t accidentally fritter it away.<\/p>\n
An offset account is a great facility to use for this.<\/p>\n
5. Get your head around the numbers<\/span><\/h2>\nAccurate and realistic financial forecasting is essential to make the success of any business venture, and property investing is no different.
<\/div><\/p>\nMake sure you\u2019re accounting using long-term averages, not just the typical month\u2019s expenses, so you have a buffer for things like council rates, land tax<\/a>, repairs and\u00a0maintenance.<\/p>\nLarge expenses that happen infrequently.<\/p>\n
6. Don\u2019t underestimate the importance of proficient property management<\/span><\/h2>\n
2. Accept that the perfect deal does not exist<\/span><\/h2>\nInstead, set your sights on the best deal possible for your circumstances, with your budget in the current market.<\/p>\n
Otherwise, you\u2019ll become paralysed by inaction as you constantly search for something better, and we all know that if you keep doing nothing you\u2019ll get nowhere.<\/p>\n
As long as the property meets your investment criteria and represents a sound value in the current market, take the steps towards buying it \u2013 or you risk being in \u201cresearch mode\u201d for years.<\/p>\n
The perfect deal is a myth, so look for a good deal because you make your money\u00a0when you purchase your property by buying \"the right property\" - not by\u00a0buying it cheaply.<\/p>\n
3. It\u2019s not a race to the bottom<\/span><\/h2>\nCheap properties that command relatively high rents might sound enticing, but these tend to be located in poor capital growth suburbs or in lower socio-economic areas and you should be wary of the potential pitfalls.
<\/div><\/p>\nYou\u2019re more likely to attract tenants on low incomes who might struggle to pay rent, and crime and antisocial behaviour is often higher in these suburbs.<\/p>\n
That doesn\u2019t mean you have to invest in million-dollar properties in sought-after areas, but do stick to middle-income, family suburbs, even if you\u2019re looking for a bargain<\/a>.<\/p>\nAffordability pushes up house values\u00a0 - but that doesn't mean you should buy cheap properties.<\/p>\n
It means that people with higher-paying jobs can afford to buy new homes or upgrade their homes and areas where wages growth is higher than average experience capital growth that is higher than average.<\/p>\n
So that's where you should be looking.<\/p>\n
Leave the slums to the slum lords!<\/p>\n
4. Have a slush fund<\/span><\/h2>\nSmart property investors don't just buy real estate - they buy themselves time by having financial buffers in place to see them through the cash flow ups and downs of running a property investment business.<\/p>\n
Appliances break, accidents happen and tenants go AWOL and leave you in the lurch.<\/p>\n
Often you can\u2019t predict these things, and Murphy\u2019s Law is they\u2019ll always happen when you\u2019re least able to afford them.<\/p>\n
Don\u2019t rely on the credit card or mortgage redraw to cover these costs, and pay hefty interest in the process.<\/p>\n
Always, always<\/i> keep afloat for emergencies and repairs, ideally in a separate account so you can\u2019t accidentally fritter it away.<\/p>\n
An offset account is a great facility to use for this.<\/p>\n
5. Get your head around the numbers<\/span><\/h2>\nAccurate and realistic financial forecasting is essential to make the success of any business venture, and property investing is no different.
<\/div><\/p>\nMake sure you\u2019re accounting using long-term averages, not just the typical month\u2019s expenses, so you have a buffer for things like council rates, land tax<\/a>, repairs and\u00a0maintenance.<\/p>\nLarge expenses that happen infrequently.<\/p>\n
6. Don\u2019t underestimate the importance of proficient property management<\/span><\/h2>\n
Cheap properties that command relatively high rents might sound enticing, but these tend to be located in poor capital growth suburbs or in lower socio-economic areas and you should be wary of the potential pitfalls.
You\u2019re more likely to attract tenants on low incomes who might struggle to pay rent, and crime and antisocial behaviour is often higher in these suburbs.<\/p>\n
That doesn\u2019t mean you have to invest in million-dollar properties in sought-after areas, but do stick to middle-income, family suburbs, even if you\u2019re looking for a bargain<\/a>.<\/p>\n Affordability pushes up house values\u00a0 - but that doesn't mean you should buy cheap properties.<\/p>\n It means that people with higher-paying jobs can afford to buy new homes or upgrade their homes and areas where wages growth is higher than average experience capital growth that is higher than average.<\/p>\n So that's where you should be looking.<\/p>\n Leave the slums to the slum lords!<\/p>\n Smart property investors don't just buy real estate - they buy themselves time by having financial buffers in place to see them through the cash flow ups and downs of running a property investment business.<\/p>\n Appliances break, accidents happen and tenants go AWOL and leave you in the lurch.<\/p>\n Often you can\u2019t predict these things, and Murphy\u2019s Law is they\u2019ll always happen when you\u2019re least able to afford them.<\/p>\n Don\u2019t rely on the credit card or mortgage redraw to cover these costs, and pay hefty interest in the process.<\/p>\n Always, always<\/i> keep afloat for emergencies and repairs, ideally in a separate account so you can\u2019t accidentally fritter it away.<\/p>\n An offset account is a great facility to use for this.<\/p>\n Accurate and realistic financial forecasting is essential to make the success of any business venture, and property investing is no different. Make sure you\u2019re accounting using long-term averages, not just the typical month\u2019s expenses, so you have a buffer for things like council rates, land tax<\/a>, repairs and\u00a0maintenance.<\/p>\n Large expenses that happen infrequently.<\/p>\n4. Have a slush fund<\/span><\/h2>\n
5. Get your head around the numbers<\/span><\/h2>\n
6. Don\u2019t underestimate the importance of proficient property management<\/span><\/h2>\n