The Key to Success: A Guide to Investment Properties
The dream might have once been to own your own home, but it feels like times have changed and now our success is defined by having an investment property. You can hardly blame us all for aspiring to this ideal though, with homely cottages, bright beach houses and inner-city apartments offering a fantastic investment opportunity for anyone. If you are just dipping your toe into these waters or have an investment already but unsure whether this is the asset class you should be considering – read this guide to investment properties to colour your decision making.
Ensure your investment is managed
The first thing to note about investment property is that someone needs to manage it, and it’s a lot more complex than giving your friends the place for the weekend. Property managers like My Rental manage the tenants, vacancies and any maintenance issues that might occur through the duration of a tenancy. The idea of being an investor is that you want a passive income, if you spend all your free time managing the property, then you haven’t exactly landed that freedom you worked so hard to achieve. Once you choose a property manager you will never look back, so make contact with the ones you trust in your city and see what they can bring to the table.
Buy with your head, not your heart
When you buy shares, stocks or bonds, you don’t romanticise that transaction but have arrived there through a smart, well-researched decision. You should apply that same logic to your investment property and seek out an asset that meets your defined criteria. Don’t be swayed by the classic awnings or how beautifully the home is styled during an open home – you are looking for a sound investment and not a place to live. If you want some assistance in bidding smart and sticking to your resolve and budget, you might want to consider engaging a buyers advocate who will do the active bidding during an auction or negotiation removing you and your emotions from the deal.
It’s helpful to put yourself in the eyes of the tenant when you make key decisions. You might like the rain shower head in the apartment bathroom, but is it worth the higher price when your tenants might actually need a shower/bath for their children instead? Is the timeless cottage-style home worth the high price tag if it’s in a flood area? Your property is a sum of its parts – so stay focused and let the data drive you.
Understand the market and the risk
Property investment is more than just positive or negative gearing, in fact, it might take a few months or years to even be having that conversation. Before you commit to property investment, you will need to get comfortable with the idea of the uncertain market you are entering. Like any market, there is a bull and bear market period so crunch the numbers and make sure you can cover yourself in those hypothetical low times before you get the keys. You also want to consider having an emergency fund that would allow you to fix or maintain your investment property, whatever that entails. There is a reason some investors stay clear of property asset classes, it can be messy, but if you are prepared and ready for the responsibility – then full steam ahead.
There are some great property podcasts and media you can start to immerse yourself in, as you never know what tidbit is going to help later down the track. It will also shift your mindset to think like a property investor and understand what the common hurdles are for you and your journey ahead.
There are so many reasons why property investment should be a part of your long term plan, but you should weigh up all the factors and start having those conversations with independent mortgage brokers, property managers and real estate agents now.