As you know, investing in property is a HUGE decision, and not one to take lightly. It requires a lot of planning, time, effort and commitment if you want to be successful. Before jumping head first into searching for a property, it’s important to first make sure you understand the process and what you’re getting into. Unfortunately, many investors dive in too quickly and find themselves lost or taken advantage of because they didn’t take the time to prepare for the journey.
That’s why I’ve put together a comprehensive guide to help you prepare for and navigate through your investment journey! It includes every single step & decision you will need to make all the way from determining what type of investor you are, how you’ll finance your deposit, which property is best suited to your circumstances, negotiation tactics and insurance, right through to how to increase your rental yield and get the most from your investment. Check it out below!
- What Type Of Investor Are You?
‘The First Time Investor’, ‘The Weekender’, ‘The Manager’, ‘The Passive Investor’ and ‘The Pure Investor’. Understanding what type of investor you are is essential in terms of identifying the property investment strategies you should consider. The strategy you choose needs to be aligned with your risk profile, capabilities, the available time you have and the financial and personal goals you are trying to achieve.
- What Stage Of Life Are You In?
When it comes to figuring out the right investment strategy, many investors fall short because they don’t take into consideration their current personal circumstances, as well as future goals. Before deciding to invest, take stock of things such as your job, family and relationship. Are any of these likely to change soon and impact on your investment?
- Who Will You Need On Your Support Team?
To get the most out of your investment, it’s beneficial to seek the help of professionals who can assist you in areas that fall out of your own expertise. These can include people such as an Accountant, Conveyancer, Mortgage Broker, Financial Planner, Buyer’s Agent, and Pest/Building Inspector.
- How Will You Finance Your Deposit?
There are a number of options you have available when it comes to financing your deposit. You can choose to save for the full deposit yourself, or use an alternate route, such as property share, parental guarantee, or even utilising available government grants.
- Key Things You Need To Do Before Approaching A Lender
When it comes to securing a loan, there are a few things lenders look for when considering whether or not they will lend to you, as well as how much they are willing to lend. These include savings, stable employment and gross income, credit cards, knowledge of lending criteria, whether or not you own your own business, residency, HECS or other schooling debts, credit history, child support and they will also go through your bank statements.
- What Type Of Lender Will You Choose?
Many people automatically go straight to their local bank when it comes time to secure a loan, however, this can limit your choices. Seeking the help of an experienced and qualified Mortgage Broker may be a better option, as they have access to 10+ banks and 50+ products at their fingertips.
- What Type Of Loan Is Suitable For Your Circumstances?
When it comes to loan types, there are a few to choose from, including a Variable Loan Rate, Fixed Loan Rate, Split Loans and Low Doc Loans. When looking into the different types of loans you can get, it’s super important to be realistic with yourself. Understand what your ability is to repay the loan without extending yourself too much – you want to be comfortable with your repayments.
- How Will You Protect Yourself And Your Investment?
When it comes to investing, it’s all about having a solid plan and strategy in place. This doesn’t just apply to the physical property itself though – it’s also relevant for the associated processes. You need to make sure that you’re covering ALL your bases when you invest, as you don’t want to be caught out down the track. This includes doing things such as investing in insurance (Life Insurance, Income Protection, Trauma and Total & Permanent Disability) as well as setting up your Will.
- What Type Of Ownership Structure Is Suitable To Your Circumstances?
Individual, Company, Trust, Partnership or SMSF – choosing an ownership structure is a huge part of making sure your investment is successful. I always recommend consulting with a qualified accountant that specialises in investment structuring to ensure you are choosing the right one for you. If you’re not fully aware of all the implications of each structure, it’s easy to choose the wrong one which can cost you greatly!
- What Type Of Property Is Suitable To Your Circumstances?
New Property vs Existing Property, Unit/Townhouse vs House and Land, Interstate vs Overseas… There are SO many types of properties out there, how on earth are you supposed to know which one is best for you? While it might seem overwhelming when you first start out, if you take the time to really break down your property options, you’ll find it becomes fairly obvious which ones you should be searching for.
- What Factors Should You Evaluate To Find The Right Investment?
There are a number of factors you should take into consideration when looking at properties, including access to nearby amenities (parks, shops, schools, public transport, medical etc) number of bedrooms/bathrooms/car spaces, state of and inclusions across bathrooms, bedrooms, kitchen, backyard/outdoor areas, security measures, fences etc. You should also consider things such as vacancy rates and average rental yield in the area.
- After Property Identification, How Will You Negotiate The Best Price?
When it comes to negotiation, there are a few things that can help you get the best outcome. Understanding the process, knowing the market, connecting with the real estate agent, having confidence, avoiding low balling and knowing (and sticking to) your budget are all assets you should have under your belt.
- What Pre-Purchase Inspections Should You Have Done?
Pre-purchase inspections can help provide you with essential information about the condition of the property that may impact on your decision to purchase. There are a few different types, with Building, Pest & Strata being the most common. You may also be interested in a Practical Completion Inspection if you are purchasing a new build, and of course, you should always conduct one final Pre-Settlement Inspection!
- What Should You Do When Purchasing/Making An Offer At Auction?
When it comes to making an offer or purchasing a property at auction, it’s important to keep a level head and stick to your plan. My top three tips? Don’t get emotional, don’t get intimidated by the agent and don’t spend more than you can afford!
- What Are Your Next Steps Post Auction/Offer Confirmation?
After you have made an offer comes the legal, conveyancing and loan finalisation steps. This will include things such as reviewing the contract, engaging a conveyancer to also review it and conduct thorough searches, as well as finalising your loan documents. From there you can sign the contract, sign your bank documentation and enter into the settlement period.
- What Type Of Insurance Should You Invest In Post Purchase?
As an investor, your greatest assets will be the properties that make up your portfolio. As is life, sometimes the unexpected happens. While there are ways to minimise risk, sometimes it’s simply unavoidable. It’s times like these that it’s essential you have measures in place that cover you. Insurance – particularly building and landlord’s insurance – are great assets that I recommend all property people should invest in!
- How Will You Manage Your Property After Purchase?
Property management is an important part of your investment. If done correctly, it will ensure that your property is maintained to a high standard with minimal costs to you. If you have the time, you can DIY and manage it by yourself. If, however, you have a full-time job, a family or other commitments that prevent you from investing the time and effort you need into maintaining the property, you can choose to outsource the management to someone else.
- How Will You Actively Increase Yield On Your Property?
When it comes to increasing the yield on your property, there are a few things you should consider. These include hiring an expert property manager to handle the day to day running of it, monitoring rental prices and increasing/decreasing as necessary, updating the property, charging for utilities, allowing pets and claiming tax deductions.
So there you have it! The complete road to investment, all mapped out for you! Have any questions about the process? Feel free to leave them below for me to answer!
Until next time,