Admit it, you’ve been thinking about investing in property. You’ve read the books, magazines and reports. You’ve been religiously checking realestate.com.au for properties. Yet when push comes to shove, you get stopped.
You’re not alone. In fact less than 6% of Australians or roughly 1.3 million own an investment property, even though property is a national past-time for us. This is not surprising. A lot of people get overwhelmed by the process and quit before they even begin. Reality is, property investing is pretty simple. There are no complicated steps you need to do and the concept is also easy to understand.
So here are six steps to starting a property portfolio on a solid ground, without losing your mind.
This can be as simple as listing all your assets, including incomes and work out your expenses.
This will give you an idea how much cash you have available to invest. Don’t immediately assume that you can’t afford to invest. As long as you have a stable and reasonably good paying job with solid employment history, you won’t have a problem getting a loan.
You can get pre-approval through your lender directly or through your trusted mortgage broker. Going through a broker before applying for a pre-approval can be beneficial if you’re not sure you’re financially ready to invest.
Applying for multiple pre-approvals is not a good idea. Each time you apply, the lender will check your credit record. If there are multiple inquiries, this sends a red flag to the lender and may refuse your application.
Top tips
What are you looking to achieve? What does success look like to you? Property investors generally invest in property to secure their financial future or to be free to do what they want, when they want it. In order for you to achieve your goals, you must first articulate what your goals are. More importantly, you need to set a deadline as to when you want to achieve these. Then you can work backwards.
For example, if you’re looking to replace your income and retire on your investments within 10 years, you can start by creating a 10-year plan, broken down further to 5-yearly, yearly, bi-annual all the way down to weekly timeline. This way you don’t get overwhelmed by the enormity of the task.
Your risk profile will dictate your strategy. What sort of risk can you tolerate? Getting an understanding of your own attitude to risk will help you create a strategy that reflects this.
It’s not sexy. It’s not even remotely interesting. But budgeting is the only way to ensure you’re able to balance your income and expenses. It allows you to see where you’ve been spending your money and helps you to plan for bigger expenses down the line.
Make sure to set this up even before you start looking for a property.
What does an ideal purchase plan look like? It’s simple. It should facilitate your goals of growing your portfolio to a point where it’s producing the growth or income you’re aiming for. It should serve as a structure for you to stay in the game.
Here is an example of a purchase plan you can follow:
It’s easy to get overwhelmed when you’re starting something new and as massive as property investing.
But don’t give up. Just imagine in 10 years, if you buy the right properties this year, you could be sitting back, feeling happy, secure and even proud that you bought properties that more than doubled their values while your peers and everyone else wishes they’d bought back in 2013. How good would that feel?
Source: www.realestate.com.au
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