Top 10 Property Investment Tips: For the New Kid on the Block
So, you want to become a property investor. Well, you’ve come to the right place because I’m here to give you the ultimate in property investment tips to put you on the path to investment success. No jargon, no fluff, no drivel – just pure unadulterated information to help you embrace that inner investor that’s patiently awaiting their freedom.
If you’re keen on investing then you’ve obviously been thinking about your future. Investing in property is still considered one of the most reliable ways to make a profit long-term and set yourself for retirement. Whether you plan on buying a house and selling it off from the get-go, or buying a home you settle in to renovate, putting your money into the housing market can be a brilliant way to increase your profits.
Sounds simple right? Well, as straightforward as it might seem, there are some important things to consider before unleashing your property investment powers for the housing market to behold… So let’s jump into our 10 tips for property investment success so your inner investor can get down to business.
1. Know your budget inside out
Do you know every little detail of the comings and goings of your capital? If the answer is no, then you’ve got some work to do. Before you decide to take the plunge into property investment, it’s essential that you have a clear and comprehensive understanding of your cash flow, otherwise you will become disoriented very quickly and be at risk of making some terrible financial decisions.
It might also be wise to have a talk to your bank about your investment options. Apply for pre-approval so you know exactly how much money you’ll be allowed to borrow, which will give you the green light to start looking for properties within your price range.
2. Be prepared for upcoming & hidden costs
Speaking of budgets, now that you know how much you can afford to put into the property itself, it’s time to write up a list of all the additional costs you’ll need to budget for. A few things you’ll want to consider will be:
Body corporate fees (if you buy an apartment within a complex that has multiple owners)
Management fees (if you hire someone to look after the property)
Additionally, after you finalise the purchase on your investment property, it’s going to be a very good idea that you do whatever you can to ensure that no costly issues arise – these will just make you angry-faced and empty out your wallet. So now will be the time to take preventative measures and get onto property maintenance by replacing the old with the new and improving any wear and tear that might come back to bite you in the butt with a very unfriendly bill.
3. Put your back into it
One of the best ways to save money when investing in property is to get your hands dirty. And no, I don’t mean by bribing a council member to cut your rates. I mean, if you’re up for it, put your own blood, sweat and tears into the house and renovate it yourself (hopefully without the blood). The costs of paying tradespeople to renovate for you will be very high, so if you want to significantly amp up your profit margins, then roll up your sleeves, tell Dave you’ll shout him a six pack if he brings the angle grinder, and get to work!
4. Timing is everything
You need to be realistic about your property investment goals so you can make the right decisions for your long-term visions. The potential for profits you can gain will not only depend on how long you hold onto a property for, but also on the current climate of the property market.
Despite your eagerness to sell or put your house up for rent, it might actually be in your best interests to hold out during periods of slow economic growth. Otherwise, if the market is booming, you’ll likely want to prepare your property quick smart and turn it over for a tidy profit.
5. Invest in areas with growth
If you’re unsure where to look to find your perfect investment home, the best thing you can do is to choose an area where rental properties are in high demand. This is one of the best indicators that an area is highly sought after and appealing as all heck. It’s also going to be smart to look for houses that are in close proximity to lifestyle essentials, such as public transport, supermarkets, schools, universities, and cultural hubs. In the case for attractive property investments, the more, the merrier.
6. Is negative gearing a good idea?
Negative gearing will take effect if you are unable to fully cover the rent repayments on your investment loan, which is something you’ll want to include in your budget as it could potentially put you under more financial stress than originally expected. You may well receive tax benefits from negative gearing so it’s not all bad, but at the same time, you’ll want to make sure that you don’t find yourself in a situation where you can’t maintain the rate of repayments in addition to the plethora of other additional costs that have a tendency to crop up over time.
7. Listen to your head & not your heart
Housing investment is not only smart, but it’s also exciting! Which makes it rather easy to get caught up in the thrill of it all and begin thinking with your heart when you should be using your head. Try not to let your emotional attachment to a house get in the way of making intelligent decisions as this could cost you many thousands of dollars if you’re not careful.
You might have fallen in love with that beautiful old villa that overlooks the ocean but have a think about how much it might cost you to retain its crumbling walls or excavate the land for future builds.
If you have to, write a list of pros and cons, and be ruthless if you struggling to see any downsides… there is almost always something.
8. Can you invest while paying off your current home?
Despite what you might think, it’s not essential that you have your own home completely paid off if you’re wanting to invest in more property. Obviously, it’s important that you don’t stretch yourself further than you can go, but as long as you’re aware of your current state of financial affairs and are not overburdening yourself with excess debt, the sky’s the limit.
Before you get too excited, however, you’ll likely want to have paid off a substantial amount of your current home loan and any other debts you might have looming overhead. This way you can make sure that you’re in control of your finances and will be in the best position to ensure that your repayments don’t get out of hand.
9. Don’t believe the hype
Sometimes it can be difficult to see through all the smoke and mirrors thrust upon you by real estate agents and fancy advertising, but at the end of the day, it’s essential that whatever house you choose to invest in is fully functioning. It’s also very important to ensure that the property is easy to keep clean, not only for its future presentation for potential renters but for its ability to stay that way over the long term. Either way, just be sure to keep your wits about you and don’t be fooled by luxurious interiors or stylish designs… just make sure the plumbing works!
10. Should I get a building inspection?
Yes. Yes, and yes! You’re going to want to get a building inspection.
Before you take the plunge and sign any legally binding documents for the purchase of your new investment property, do yourself a favour and have an experienced inspector look over the establishment first. Building Masters Inspections will provide you with an extensive inspection report outlining anything and everything that might cost you thousands of dollars in repairs.
There is a vast multitude of potential issues that can easily go unnoticed by untrained eyes and ears, so don’t throw all your money into a home only to get caught out by unseen property defects – get a building inspection and at the very least you will have peace of mind knowing that termites won’t be eating away at your property investment dreams in the years to come. This type of report will also serve as a powerful negotiation tool for you to encourage the agent and the vendor to reduce the purchase price.
Best of luck to all you investment tycoons! Although with investment tips this good, who needs luck?
Mike Heathcote is the founder of Building Masters Inspections and a veteran builder with decades of experience. Utilising his industry knowledge, Mike and his team of experienced Builders provide an Inspection Service offering expert opinion on the true condition of buildings, including estimated repair costs, helping home buyers find their perfect property, Melbourne wide.