Ready to start investing in real estate?

Adding investment property to your portfolio is a great way to diversify your holdings and give yourself a hedge against inflation. Although stocks, bonds and CDs can be great investments, some people prefer real estate because it’s tangible and has the potential to help you expand your wealth considerably when leveraged wisely.

Taking the first steps toward investing in real estate can be daunting, but with good advice, you can join the ranks of millions of Australians who invest in their future with property.

1. Build a Good Team

Investing in property requires the help of several different people: a lender, perhaps a real estate agent, a property adviser and even some home repair specialists. If you haven’t worked with any of these professionals before, ask around for recommendations. When you have a team of responsible, adept people around you, you’ll get great results.

2. Choose a Solid Location

Many first-time investors limit their searches to areas near their own residences. There’s nothing wrong with this, but it’s wise to expand your view. While it can be convenient to purchase a property near your own home, you could miss out on some excellent opportunities further afield.

3. Learn About the Market

Once you’ve chosen a location for your property, learn as much as you can about the market. Research current prices, future zoning issues, government building projects in the area, and transportation options. Knowing this information will help you to determine values and negotiate with sellers. Subscribing to property blogs is a great first step.

4. Remember That Property Investing is a Business

When you start searching for a property, it can be tempting to approach your investment as you would when finding a home of your own. Remember, though, that property investing is a business, and you should treat it as such. Develop a business plan with realistic goals, and work out your projected cash flow before you decide on a purchase price.

5. Prepare Your Finances

Don’t waste your time looking at properties before you have gotten your finances straightened out. If you need to pay off debt before you approach a lender, make the sacrifices necessary to do so. Talk with a lender about how much you can afford and what you can do to get the best rates.

6. Investigate Rents

A property may look like a great deal, but if you can’t charge enough rent to cover your costs, you might find yourself struggling to maintain it. Investigate rents and leasing terms, and make cash flow calculations before you get too attached to a particular property. If positive cash flow isn’t an essential part of your strategy, you may like to research your gearing options.

7. Learn from Others

There’s a lot to learn when it comes to property investing, so approach the venture humbly and learn as much as you can. If you can find a local mentor to help you through your first purchase, you’ll have a much smoother experience. Consult with experts at every major step, and read blogs, books, and e-books about the business of property investing.

8. Be Particular

Buying a property is a big deal. Most first-time investors have to get a loan to cover the purchase, and going into debt is no small thing. Because there’s so much at stake, it’s important to be particular. Don’t settle for a mediocre loan if you can get a better one. Don’t jump into a real estate deal for convenience if you can find a better one with a little more work or a little more time.

9. Stay Focussed

Here’s a story that’s all too common: a new property investor buys a house as an investment. It needs a little work, so renovations begin. One renovation leads to another renovation, and soon the project is all about creating a dream home. It becomes the investor’s pride and joy. The renovations break the budget and cause delays in filling it with tenants. When tenants do finally move in, they don’t treat the property like a “dream home.” They just treat it like a rental property. And the investor becomes discouraged with the entire process and sells with sub-par capital growth.

Avoid this scenario by staying focused on the goal. Investment properties are businesses. Stick to your goals and deadlines, and don’t get sidetracked along the way.

10. Get Started

Some people research property investing for years and years without ever taking the plunge. Don’t let this happen to you. Create a viable plan, and get started as soon as viable for your own situation. After all, it’s rare to hear someone say, “I wish I would have waited a few more years to start investing.”

For more advice about property investing, or to set up a time to talk with us about getting started, contact us at Full Financial Services.