Have you always wanted to invest in property, but don’t know how to start? Don’t worry, you’re not alone…
Real estate is somewhat of a national obsession, so it’s hardly surprising that property investment is a goal for many Australians. However, ATO statistics show that less than 10% of people have actually taken the plunge.
If you’re wondering how to start investing in property, we recommend following these simple steps.
1. Work out your goals
Before you even look at a property, you need to be clear on what you want to achieve from your investment. Whether it’s a bigger nest egg for retirement, financial security for your family, or enough income to stop working, your long-term goal should inform all your investment decisions.
2. Determine your investment strategy
Once you know what you’re trying to achieve, you need to work out the best way to go about it. Your investment strategy should take into account your appetite for risk and set out the:
- returns (rental income, capital growth, etc.) you expect
- types of properties you’re interested in (units, houses, commercial / industrial)
- amount of renovation / development you’re willing to do (if any)
- frequency of future investments (i.e. how often you’d like to add to your portfolio)
borrowing approach (interest only, using your home’s equity, etc.) you’d prefer
3. Get to know the property investment basics
After you’ve put together your plan, you should do your research. There’s no shortage of tools explaining how to start investing in property – many of these have great tips on real estate investing for beginners, but be wary of get-rich-quick schemes and anyone offering ‘guaranteed returns’.
4. Confirm your borrowing capacity
As a first-time investor, you’ll almost certainly need the bank’s help to buy. A mortgage broker can help with this and it’s best to find one that specialises in dealing with investors. It’s also important to make sure that the potential repayments fit your lifestyle and goals, and that you get pre-approval (so you can move quickly when you find the right place).
5. Choose an area
Defining a search area can be difficult – your natural inclination will likely be to look in your local area, which may not be the best decision. Instead, focus on areas with low supply and high demand – tools like www.locationscore.com.au can help you work this out. You may also want to consider regional areas or even interstate.
6. Select a property
Just like with the search area, your natural inclination will probably be to choose a property that fits your taste and lifestyle… again, this may not be the best decision. When looking at places, keep your goal in mind:
- if rental income is your focus, look for properties that offer a high yield (rent amount vs property price)
- if capital growth is your focus, look for properties that have a high land to asset ratio (land value vs property price)
When it comes to negotiating a sales price, it’s important to keep your emotions in check. Remember that investing is a numbers game and be willing to walk away if you can’t get the right price.
8. Celebrate… and repeat
Buying an investment property is a big move – it’s a significant financial outlay and a critical step toward achieving your financial freedom. Acknowledging and celebrating this is important and will help keep you focused on your end goal. It also provides a great opportunity to reflect on the whole process and think about what you’ll do differently the next time!