Rookie property investors, this post is for you!
Because in this blog post, we’re going to give you some fantastic advice that will help you get into property or move up to the next rung of the property ladder.
But first, some words of warning…
Property investment is not something you should enter into lightly.
Many investors enter the property market with dreams of making millions and end up failing. The stats show that around 50% of people who buy an investment property sell up in the first five years. Of those who stay in the game, 90% never get past owning one property.
But not all is lost!
Knowledge is power!
One of the first things you need to understand is what makes a good property investment.
There are several ways you can profit from property, and if you get the combination right, you’ll be able to make money from bricks and mortar.
These include…
- Capital Growth – Simply put, capital growth is the appreciation in the value of an asset over time. This will come from strong owner occupier demand (who will push up property prices) and tenants (who help to pay your mortgage).
- Accelerated Growth – Getting your hands dirty by investing in a property that needs renovations or a major facelift is a great way to manufacture capital growth
- Cash flow – Your rent.
- Tax benefits – While you shouldn’t invest solely for tax benefits, a good tax strategy can help manage your cash flow, decrease your tax and increase your bottom line.
Location, location, location
Rookie property investors often forget that location is crucial when it comes to property investment.
But what makes a good location?
When we look for new areas to develop, we look for those that are in the process of being transformed and are set for a resulting surge in property prices. The best way to identify these areas is to drive through the streets and look for indicators, especially major residential developments in progress.
Market cycles
While timing the market is not always the be all and end all, it certainly helps to understand how property markets move in cycles.
Following the herd and buying when everyone else is doesn’t always work. Quite often, this happens when the market is at its peak.
You have more chance of nabbing a good property deal in a buyer’s market, when things aren’t looking so great for property. Take advantage of low prices, and benefit from when they rise again.
Money, money, money!
A sound financial strategy is just as important as a sound investment strategy.
Without a real understanding of how to maximise your borrowing power, use equity as a leverage to build your portfolio, or maintain a financial buffer to see you through the hard times, you are setting yourself up to fail.
Financial literacy is also incredibly important in property investment. While you don’t need a property degree to get by, it will help to have some knowledge of investment structuring, taxation, and the financial advantages you can enjoy as a smart investor.
If you’re unsure, it’s well worth surrounding yourself with a good team of professionals who can guide you with their knowledge and expertise.
If you’re the smarter than the team, you’re in trouble!
