HOW SHOULD FIRST TIME PROPERTY INVESTORS GET STARTED!
Property investment is a good way to earn lasting passive income. However, it can also be daunting, especially for first-timers. If you’re one of those first-timers who don’t know where to start, here are some pointers for you!
Before you start looking for properties, you should:
Figure out your finances.
Offset your expenses against your income and assets so you can see how much money you have for investment. You can also ask a financial advisor for help and guidance on how to go about the investment.
See if you can get pre-approval.
A pre-approval is a lender’s formal indication that they will lend you a certain amount of money. You can get this by going directly to a lender or a mortgage broker. They will check your credit history to see if you’re financially fit to have a loan and have the ability to pay for it.
Remember that you’re allowed to not proceed with the loan, but keep in mind that applying for multiple pre-approvals leaves a mark on your credit record. This can send a red flag to the lender and they might refuse your application. So before you apply for pre-approval, you need to be 200% sure that you want it.
Research, research, research.
Read property websites and magazines to be knowledgeable and updated on property market trends. This is essential in making the right choice regarding your investment. Also, ask for advice from property experts to get valuable insights regarding properties and investment.
Aside from those, you must know how the investment process goes. It is so that you’ll know to stay away from anyone who might take advantage of you being a first-time investor and guarantee you overnight riches.
Figure out your goals.
What do you want to achieve with this investment? Write down your goals - not just broad goals, but specific goals with deadlines. Doing so will allow you to create a plan and a date to aim towards.
For example, if you want to retire and just earn money through your investments in 20 years, start doing a 20-year plan. Then break down those 20 years into weekly, monthly, and yearly goals. This will make your ultimate goal manageable and won’t make you feel overwhelmed.
Determine your strategy.
This will be your game plan once you have your investment property. How do you want to earn and grow your investment? There are different investment strategies out you can focus on, such as buy and hold, negative gearing, and positive cash flow. However, before you choose one, you need to ascertain your attitude to risk. Can you handle aggressive strategies well? Or are you more of the low-risk type? Aside from those, assess how much time you have before retirement and your knowledge of property investments. Knowing these factors will help you know what investment strategy is right for you.
Get your investment fund going.
It might be tedious, but it’s necessary. Budgeting will ensure that you know how much money comes in and how much you spend. This will also allow you to know where you can cut back and help you plan for bigger expenses down the track.
When buying your first investment property, remember this:
Set the criteria.
This should match your strategy. This will also help you narrow down your choices. Here’s an example of the criteria you should have:
- Location. Look at suburbs that haven’t experienced a boom yet, but will soon. These suburbs have a rising population, experiencing construction of amenities such as schools or public transportation, and have limited housing supply.
- Price. Stick to properties that have the median price of an area.
- Proximity to necessary amenities. Is it near public transportation or other important amenities? If so, this will be in demand to renters.
- The number of bedrooms, bathrooms, and carport. Ask around what type of property is high in demand in the area so you can target the right properties.
- The look of the property. Is it attractive to potential renters? Does it give a good impression? These are questions you should ask yourself as a renter’s first impression is important.
Location, location, location.
Do your homework in the areas you’re interested in. Ask agents specialising in those suburbs these questions:
- Why do people like living in this area?
- What types of property are high in demand?
- What is the vacancy rate?
- Has this area experienced changes in the past 5 to 10 years?
- Does this area have no-go zones? Where are they?
- What drives the growth of this area
Buy a property that suits the market.
Once you’ve chosen a few suburbs, take note of the answers you got from your research. Make sure that you understand what the people want in the area. However, if you’re looking at multiple suburbs and properties at once, it will be confusing for you and you might find it hard to compare one against the other. To help with that, make a list or spreadsheet. Take note of all the criteria you listed for easy reference and comparison.
You’re not buying a house for yourself.
Buying a home for you and your family is different from buying an investment property. Because of that, you need a different approach. You need to have your target tenants’ needs in mind. But one thing they have in common is using logic and not emotions when buying. Using sentimentality and emotions will lead you to purchase a property for more than it’s worth.
Reminder: Property investing won't make you rich overnight.
If you don’t think you can commit for the long haul, you might need to rethink your decision to go into property investment. Unless you have a lot of money or an aggressive strategy, you won’t achieve the constant income for at least a year. However, by persevering, planning, and consistency, you will achieve that financial freedom you want.
We hope that these pointers can help you prepare and build confidence to invest in your first property! Of course, you don’t have to do it alone - we can help you! With our years of expertise and desire to help our clients, we certainly get the job done. If you need advice or help, just drop a message on our social media accounts.
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