6 STEPS TO SUCCESS IN PROPERTY INVESTMENT
Property investing is an excellent vehicle for creating wealth and achieving financial independence. ‘Overnight’ success stories are seemingly everywhere.
But – the majority of Australians aren’t achieving these goals through investing. Why?
It seems the country has been fooled into thinking property is as simple as buying one or two properties….and watching the cash come in.
In fact, nothing is further from the truth.
The Investor Boneyard
Over the year’s spruikers, scams, scare tactics and shonky incentive schemes have decimated many investors.
Even today, far too many (over 60%) of investors are negatively geared – putting their own hard-earned cash into investment properties, subsidizing someone else’s lifestyle, while their own cash flow suffers.
This is an approach I have steered clear of in my investing. Instead, I built a balanced property portfolio, which pays for itself.
Since 2003, I have purchased more than 200 properties which are now worth over $50 million, before you ask, the net worth is $35 million and $2 million in annual passive income. That’s the kind of
But, before you race off to the nearest real estate agent, I need to say that I didn’t get here overnight. I didn’t have wealth, to begin with. But, I did have determination, commitment, and a well thought-out strategy. Luckily, these are all things you can acquire too!
Get The Right Bearings
A strategy is the most important thing in property investing. You wouldn’t walk blind into a new business venture – you would research the market and devise a strategy and a business model based on the numbers.
If you want to make money from investing, you need to treat it like a business.
You may think buying more than three or four good investment properties is impossible now that prices are so high and lending is so tight.
The reality is, it is possible to build a portfolio of 10, 20 or even 200 properties if you set yourself up correctly and buy the right properties that are in line with your goals and strategy.
1. Set A Goal
Be specific in setting your end-goal. Say, your goal is to generate a passive income stream of $100,000 a year and an early retirement. How will you achieve this? If you owned seven properties debt free, and they were each earning $350 per week in rent, you would make over $120,000 a year in rent before tax.
Sounds much better than the two properties most investors stop at – they would only get you $36,400 a year, and that’s before any interest repayments, holding costs or repairs!
2. Devise A Strategy
How will you achieve this goal? In order to have seven properties debt-free, you may need to buy 14 properties and wait for them to double in value. You could then sell half and use the profits to pay down debt.
Or, you could use your equity from this ‘foundation portfolio’ to invest in meatier properties such as developments, apartment blocks or shopping centers.
When planning out your strategy, it helps to get help from someone who’s been in the trenches and had success. The experience is invaluable in shaping your own plan.
Find someone who’s created the success you want to model. An ethical and strategic buyer’s agent like my own Binvested (yes, you do need to check it out here) is also a popular choice for many ambitious investors.
3. Research The Market
Not all properties and markets are worth buying into. There are several markets in Australia that I steer clear of, and others that I focus on. Even in cities I do often buy in like Brisbane, The Gold Coast and Sydney, there are regions I don’t touch at all.
4. Find A Finance Strategist
Getting a loan to support your investing strategy is not a matter of finding the cheapest interest rate. Cheap, low-interest loans come with strings attached, which can restrict your ability to buy more properties.
Having the right loan structure from day one is absolutely essential to the portfolio builder’s success.
Find yourself a finance strategist with experience in financing large property portfolios, to make sure that you are setting yourself up for success. I would personally recommend Zinger Finance.
5. Speak To An Accountant, Financial Planner and Solicitor
Run your strategy past your accountant, financial planner, and solicitor in order to understand any cash flow, tax implications and legal ramifications, as well as the best course of action to take.
Once again, ideally these would be professionals with a keen interest in property and experience with other successful investors.
6. Buy Based On The Numbers And Your Strategy
Don’t let your emotions guide you on your purchases. Buy properties that are in line with your strategy – and in the right order.
Make sure you build a balanced portfolio, with an overall neutral to positive cash flow.
Make sure to not pay too much, and buy in a metropolitan area with a good upside for growth.
The best properties are what I like to call ‘bread and butter’ properties. These are entry level, blue collar residences. They hold less risk than top end properties because there is always a need for affordable housing. There is also little room for values to fall in a market shock.
Make sure the numbers stack up on each deal, and that each property delivers what you need it to while helping you purchase the next.