As you plan for your financial future, you probably consider many different investment options. Some of these investment options (like superannuation) are easy to grasp. Others, like investing in real estate, require a bit more know-how.
In this post, we’ll help you to understand the property investment process. With a cursory understanding of what’s involved, you’ll be in a better position to decide whether or not property investment is right for you and how you can get started.
The most important thing to remember is that investing in property is not rocket science. It doesn’t require a top-shelf education, a wealthy background, or even a lot of start-up capital. However, it does require the will to learn, hard work and sustained focus.
What is the Property Investment Process?
Step 1 – Research, Plan, and Get Ready
Like we said, property investing doesn’t require a university education or a specific degree, but it does require the ability to learn and plan.
You’ll need to do some research about the real estate market, what it takes to create a positive cash flow, and which properties are likely to be good long-term investments. There are plenty of resources to help you out. You can read property blogs and books, attend seminars, and meet with investment experts who can give you advice along the way.
As you research, you’ll gain the information necessary to start making plans. You’ll zero in on a specific area in which you’d like to invest, and you’ll figure out how much money you’ll need for your down payment and initial expenses.
Avoid taking shortcuts during this first step. For example, don’t always take someone else’s word for something. Verify advice by doing some research yourself.
Step 2 – Get Your Finances in Order
If you’ve had trouble keeping your personal finances in check, now is the time to conquer this problem. Before you can secure a loan for an investment property, you’ll have to sit down with a lender and examine your list of assets, income and expenses, so you might as well do the dirty work yourself first.
As a property investor, you’ll need to get good at keeping records. Start by sticking to a budget and recording when and how you spend your money. Look for places to cut back your spending so you can save for the down payment on your investment property. Most people can find ways to trim their spending, and the discipline necessary to make the cuts will help you to reach your property investment goals more quickly.
Step 3 – Set Goals
Without a goal, you can talk about getting into property investing for years without ever actually taking the leap. So sit down and think about why you want to invest in property, and then set realistic goals.
Since you know all about your personal financial situation at this point, and you also know enough about the real estate market to know how much you want to spend on your first property, you should be able to calculate how long it will take you to save the roughly 20% necessary for a down payment. You won’t know specifics about the property, so you’ll need to also give yourself time to save a little extra to cover renovations or other start-up costs. Armed with this information, you can decide on a deadline as to when you want to achieve your property investing goals.
Step 4 – Prepare for Upfront Tax Expenses
Most investment property purchases in Australia require the buyer to pay a tax called stamp duty. This tax can be as much as 2-3% of the purchase price. If you’re not anticipating stamp duty, you could find yourself stretched way too thin at a time when you need funds for repairs and advertising. Different states have different rates for stamp duty, so find out what to expect from the state where you plan on purchasing your property.
Step 5 – Start Looking!
With your preparation and research well underway, you’re in a great position to start looking for your investment property. Hopefully, by now you know where you want to invest, and you can focus on particular properties that meet your requirements.
Finding an expert property adviser can be very helpful for this phase of the process. A good working relationship with an adviser can be very helpful throughout your entire property investing career.
Step 6 – Make Your Purchase
Once you’ve found the property that will help you meet your investing goals, take the plunge and make the purchase. Having accomplished your first investment in property, you’ve learned a lot, and you’ll be in a great position to add to your investment property portfolio in the future.
Learn more about the property investment process by exploring our website or by contacting us to get in touch with a property investment expert. We look forward to helping you meet your goals!