Property investment is a popular way to create wealth, but many would-be property investors don’t understand the complexities of property investment or where to begin. It is essential to know how to maximize the return and minimize the risks. Here are the essential tips for first time property investors:
Understand that property investing is a business. It requires planning, discipline, a wide range of knowledge, willingness to take calculated risks, and a focus on getting a good return on your investment.
Develop your strategy. There are many different approaches to property investment with different financial outcomes. You might choose to:
- Buy property to retain for the long term, buy to renovate and sell, buy to renovate and retain, or be a property developer.
- Specialise in certain types of property, such as apartments, properties with multiple tenancies, coastal properties, or low cost housing.
- Specialise in a particular geographic area.
- Buy properties with a high income return or properties with a high expected capital gain.
Get expert help. As with any other business, you will need an accountant and a lawyer. It also helps to have good relationships with real estate agents, mortgage brokers, insurance brokers, property managers, property inspectors and tradespeople.
Learn as much as you can before you invest. Read property magazines, learn from other investors and research the areas you are interested in. Understanding how to estimate potential financial returns is vital.
Determine your borrowing capacity. Work with a lender to establish a level of borrowing you can sustain while still leaving some ‘wriggle room’ in case things don’t go according to plan.
Know what you are buying. Before you buy, calculate the potential return from a property and ensure you are aware of any structural, maintenance, legal or permitting issues relating to the property.