6 Tips for would be Property Investors

I read some tips for property investors in a publication the other day that was a thinly disguised plug for business. If you are considering property investment, here are a few things that I have found to be important in my own property investing journey. I hope they are helpful.

1.    Educate yourself about property investing. 

My father always told me that, “Experience is the best teacher but the tuition fees are high”.  This is nowhere more true than in property investing.  While you rarely  forget the costly mistakes you make, there is much that you can learn from others to avoid those costly learning experiences. Subscribe to a good investing magazine eg “Australian Property Investor” , read books, watch DVD’s, attend seminars, ask people who are doing what you want to do.  Property Investing is a learned skill!

2.     Understand your motivation for investing

Property investment is rarely an end in itself. By understanding why you want to invest you are able to keep the bigger picture in mind. Many people fail to understand their emotional drivers. When they strike obstacles and disappointments (as there will surely be) they forget why they started the investment journey. Consequently they lack the motivation to press through the challenges to success. How many people do you know who have sold properties because  cash flow was a challenge, only to regret the sale at a later time? Knowing  what drives you enables you to remain focussed on your  strategy.

3.    Identify an Investment  Strategy and stick to it

There are many different property investment strategies that can be adopteddepending on your circumstances. Buy and hold, buy and sell, buy renovate sell/hold etc etc. Research your chosen strategy  and identify optimum areas in which to invest which suit your strategy. Many people chop and change between investment strategies and consequently never become masters in any market. They tend to constantly learn from experience and pay the associated tuition fees.

4.    Be realistic about what you can afford and risk

Successful investment is generally a long term exercise. If you over reach your resources in terms of cash flow and equity it will quickly become too hard and you will retreat from the challenge.  Property Investment needs to be enjoyable. Everone has different risk profiles. If you are not sleeping at night you are probably being unrealistic in your  investing goals and objectives. It may be time for reassessing your available resources and goals. Investment is about denying yourself something in the present for the benefit of future gain. Unless you understand the impact on your cash flow and the full upfront costs you will incur, property investing can be a challenge. If you are not prepared to accept the implications of your investment in other areas of your life it is unlikely that you will stay the course and enjoy the benefits of long term investment strategies.

5.  Consult a Mortgage Broker before you look for an investment

Before you look for property to invest in, find out what your financial resources will allow. A good Mortgage Broker will identify what you can afford and a loan product that will enable rather than disable your strategy. If you know your finance limits you are able to focus on properties that meet your price point.  If you have a loan pre-approval in place you also strengthen your negotiating position with vendors. It is amazing how often the deal of the decade appears when you have your finance approved. Pre-approval gives you the confidence to look for suitable properties and as a wise teacher once said, “Seek and you shall find!”

6.    Choose reputable people to deal with and build a team

Property Investors need to surround themselves with reputable and dependable professionals. Find a trusted Solicitor, Accountant, Real Estate Agent, Mortgage Broker, Property Sourcer, Builder, Property Manager etc who will support you in your investment journey. A good question to people you are considering as part of your team is,

“Can you tell me about your property investing experience?” 

If they don’t have a story, chances are they will be of little use to you! Despite their relationship to finance and property, many Bankers and Real Estate Agents have minimal personal experience in property investment. Make a decision to work only with people who are doing/have done what you want to do. How can people show you the way if they have never been there themselves.