Investing in property can be daunting and complicated.
For many of us it can be difficult to know where to start and what to buy.
We become like the kid in the candy store – the one with an unlimited number of options to choose from.
Everywhere we look is a new strategy, a new opportunity, a new chocolate.
Then one day we realise that too many chocolates make us sick, and we forget why we were starting to invest in the first place:
- To create a better lifestyle for you and your family
- To take control of your life
- To step up and achieve your financial goals
- To reduce your dependence on paid employment
- To begin working on financial independence
- To create a more secure future
Today I want to re-ignite your passion for property investing, by providing you with a simple framework to get started.
I will do this by sharing 9 simple tips for investing in property in Australia, for beginners.
1. Learn how to make money through property
Let go of the notion that you are going to get rich quick and commit to working hard and working smart.
Most of Australia’s leading investors have been at it for at least 10 – 40 years, and have learnt that you make money in the property industry through one of three ways:
- You grow the value of your property – this is called a capital gain
- You receive passive income from your property
- You receive tax benefits – depreciation, etc
Knowing how successful investors make money is a great starting point, when looking at which strategy is going to work best for you.
2. Set some financial goals
Before you go out and start looking at investing in property it’s a good idea to sit down and set some financial goals.
This can be lots of fun, as it gives you the chance to paint your own future.
A simple way to complete this exercise is to draw the following table on a blank piece of paper and fill in the blacks.
|Reality (where are you right now?)||Roadblocks (what’s stoping you from achieving your goals?)||Vision for yourself (where will you be 1, 3, 5 years from now?)|
Be honest with yourself and get clear on exactly what you want.
If you don’t feel confident doing this yourself or would like a hand, then book your FREE Strategy Session now.
3. Choose an investment strategy that’s right for you before you begin
Unfortunately there are people out there who will have you believe that property investing is complicated.
These are the same people who believe that identifying an investment strategy is difficult. I personally think this is complete bullshit.
A great way to identify which strategy will work for you is to work down the table below and circle the most appropriate option, in either the left or right hand columns. Once you’ve worked through the table, write all of your answers on a blank piece of paper and you will begin to see the foundations for your property investment strategy.
|High risk||– – – – – – – – –||Low risk|
|Short term gains||– – – – – – – – –||Long term wealth|
|Older property||– – – – – – – – –||Newer property|
|Units||– – – – – – – – –||Houses|
|Regional properties||– – – – – – – – –||Metro properties|
|Buy and hold||– – – – – – – – –||Flip|
|Cash flow||– – – – – – – – –||Capital gains|
|Multiple markets||– – – – – – – – –||Single market|
|Multiple states||– – – – – – – – –||Single state|
|Single income property||– – – – – – – – –||Dual income property|
|Go it alone||– – – – – – – – –||Build a team of trusted advisors|
|Small deposit||– – – – – – – – –||Large deposit|
|Interest only||– – – – – – – – –||Principle and interest|
|Fixed loan||– – – – – – – – –||Variable loan|
|Bank manager||– – – – – – – – –||Mortgage broker|
|Low depreciation benefits||– – – – – – – – –||High depreciation benefits|
|Under market value||– – – – – – – – –||Market value|
|On market listings||– – – – – – – – –||Off market listings|
|Light research||– – – – – – – – –||Extensive research|
|Renovated||– – – – – – – – –||Un-renovated|
|Low maintenance||– – – – – – – – –||High maintenance|
|Low holding costs||– – – – – – – – –||High holding costs|
There are also a range of books, written by successful investors which are worth taking a look at.
Remember to take the ideas in these books, and this article, with a grain of salt and to develop an investment strategy that suits you.
Your investment strategy should always be tied back to your financial goals.
4. Decide on your investment strategy and stick to it
Once you’ve identified which investment strategy is right for you make the decision to see it through.
Keep implementing your strategy until:
- You’ve achieved your goal
- It’s not working anymore
- You’ve found something that works better
It is all about finding a winning formula that works for you and then milking it for all it’s worth. The sooner you can find (and decide on) that winning strategy the better.
5. Go and see a mortgage broker
I recommend you go and see a mortgage broker before you start looking at property.
A mortgage broker will give you an idea of how much you can actually borrow and how much of a deposit you will need.
Many first time investors make the mistake of thinking they will only need a deposit. The reality is you may be required to pay stamp duty, solicitors fees, bank fees, insurances, etc on settlement.
A great mortgage broker will help you create a plan for getting into the market sooner and support you on your journey.
Looking for a great mortgage broker? Get in touch now.
6. Learn how to analyse a suburb
Learning how to analyse a suburb is an art.
The quality of your research will be dependent on the quality of the questions you ask, so make sure to ask the following:
- What’s the demand to supply ratio in the area?
- Is the population growing?
- What type of rental yield can you expect?
- What are the historical growth rates in the area?
- Is the state or local government investing the area?
- Is there any gentrification occurring in the area?
- Are there any neighbouring suburbs which are more expensive?
Your goal should be to select a suburb with growth potential that aligns to your financial goals.
7. Identify an area and focus your attention
The biggest issue first time investors face is analysis paralysis.
We spend huge amounts of time ‘researching the market’ and forget to become an expert in one area.
I used to run around with my head cut off, looking here, there and everywhere for a deal. These days I identify one market and learn everything I can about it. This way I know what’s over priced and undervalued, which is the secret to buying well.
8. Get pre-approval
Before you go and make an offer on a property go and get pre-approval from your mortgage broker.
Pre-approval gives you confidence knowing that your ready to buy the right property when it comes onto the market.
9. Make an offer
Now that you’ve set your goals, done some research, identified your market and got pre-approval it’s time to make an offer.
Don’t get too caught up if you miss out on a few deals when you’re starting out, this is completely natural. Some of the best properties I’ve purchased have came straight after I missed another deal.
I hope this beginner’s guide to property investment in Australia has taken a little bit of the stigma associated with buying your first property away.
If you have any questions I’d be happy to help you answer them in the comments below.
If you’re really stuck feel free to book your FREE strategy session today.