So, you want to be a property investor. I don’t blame you. Property investment has quickly become the most popular method of building up a nest egg for the future and comes close to being a fool-proof way to get yourself that financial security that most of us so desperately crave. However, the Australian property market is a notoriously turbulent playing field at times, and doesn’t always make for a stress-free approach to making money.
People often think that investing in property as this magical money-making scheme that requires little to no effort and results in all reward. Unless you’re some insanely rich business mogul that has enough wealth to cherry-pick houses as if you were playing a game of Monopoly, this couldn’t be further from the truth. So before you jump into the property investment game, let’s go through the five major secrets that no one wants to disclose about making money by investing in property.
Profits are not always a guarantee
Although there are many who believe that investing in property is a truly fail-safe method of spending money to make money, this is not always going to be the case. One of the biggest pieces of advice I can give you if this is the path you’re planning to take, is to remain vigilant! What do I mean by that? You need to be constantly aware of all money coming in and going out.
Regardless of whether or not you have your own property manager, this is now your sole responsibility as a property investor. Make sure that no matter what you have going on, you’re always keeping your eye on your incoming profit, and outgoing losses. There are a great deal of ongoing costs associated with owning an investment property, so you need to ensure that you don’t lose track of how much you’re spending to keep it all afloat.
Prepare yourself for ongoing surprises
This is another way of saying that you can’t expect consistency when it comes to the income you’ll be making from your tenants. There are a considerable number of factors that are going to determine the amount you are likely to receive from month to month such as the cost of rates, extraneous outgoings such as maintenance and repairs, and even the number of days within a given month. So don’t expect to be able to rely on your tenants because at the end of the day you might come up short.
The best way around this is to ensure that you always maintain a small percentage of the cost of your property as a safeguard. This way you’ll never be caught unawares by unexpected costs that could leave you worse off and looking for a way to claw back to financial harmony. This is one consideration you’ll want to prepare for in advance. There’s no time like the present!
Don’t expect any excitement
If you enjoy watching paint dry, then you’ll love property investing. If you expect to see some kind of amazingly dramatic growth in your bank account on a monthly basis then you’re going to be sorely disappointed. You need to be in this for the long haul because it’s going to be many, many years before you see any results worth celebrating over.
If you’re just starting out then it’s worth taking on a long-term strategic approach. Firstly, you want to put your energy into securing the right home to meet your specific goals. Secondly, you need to be proactive and remember that when it comes to buying and selling there is no such thing as the perfect time. Lastly, you need to play the waiting game. Don’t even bother about assessing the value of your property until you reach the 10 year mark. So get ready to become the most patient person who ever lived. Which brings me to my next point…
Patience is a virtue
As I mentioned, you will need to be content with the idea of taking things slowly. After all, you’re investing in your future, so don’t expect to have your property for a couple of years and become a millionaire by the end of it. You need to give your home the opportunity to be exposed to the full gamut of the property growth cycle. This means that you wait it out over 2-3 periods of sequential booms and busts, giving your home over to the inevitable rise and fall of the supply and demand of the market.
So with that in mind, set yourself a timer for the next 20-30 years, and then check back to see how things are coming along. Does that sound too daunting? Property investing does require a certain mindset that does not come easily to most since we are all so used to living in a culture of instant gratification. That doesn’t mean that you can’t train yourself to cultivate the right state of mind though. When you really think about it, time is just an illusion after all.
Business is business
So sure, owning an investment property might seem pretty far removed from starting up a Mexican fusion restaurant, buying up a mobile dog grooming franchise, or running your own cat cafe, but when it comes down to it, they’re all businesses. You’re spending money to make money and with any business, your success depends entirely on what you put into it. Don’t take it seriously, only put in a minimal amount of effort, and you’ll likely fail to make any kind of a profit. Put in the hard yards, give it the time and energy it requires and you’ll be a roaring success. Moreover, just like with any business, you can’t go in blind. So, as keen as you might be buy up the best looking property you can find, don’t even think about foregoing a Pre-Purchase Building and Pest Inspection. Not only could this save you from making a huge mistake and buying a property that might cost you thousands in repairs, it could give you some serious bargaining power when it comes time to negotiate on price.
So go on then. Succeed!