My advice to first time property investors
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Property investment is becoming increasingly challenging for first-time investors wanting to enter the market.
Property investment is becoming increasingly challenging for first-time investors wanting to enter the market. With house prices still high despite a downturn in some parts of Australia, it begs the question: how can first-time property investors get a head start on the property ladder?
As property investing is largely about securing high-capital-growth assets, first-time investors are best to consider multiple factors that will increase their capital growth – avoiding main roads and ensuring there’s off-street parking, for instance. It’s also important to view multiple properties and research the market. While investing in a property for the first time is daunting, with the right strategy and focus, and some patience, you can achieve your dream of building a property portfolio and make some smart moves to increase your chances of getting that return on investment that you’ve always wanted.
Chris Gray’s 7 tips for first-time property investors
Know what you’re looking for
Establish which suburb and type of property you would like to invest in early on, as this will save time. Consult property data and real estate listing websites to get an idea of which suburbs have the best growth prospects. Similarly, centre your search on properties that prospective tenants would find appealing, such as those with at least two bedrooms, easily accessible parking and plenty of nearby amenities. After all, a tenanted property means a reliable income stream.
Concentrate on the numbers
Many first-time investors fall into the trap of making an emotional purchase decision, leading them to pay more than a property’s true worth. While a property’s appearance and lifestyle benefits are important, it is essential to concentrate primarily on what the numbers say. If you’re unsure, consult an independent valuer. They should have a good understanding of the typical prices in your area and will be able to provide you with an unbiased assessment of a property’s true value.
Establish a savings strategy
As the current housing market presents a considerable challenge for young people, first-time investors should determine a savings goal well in advance. That way, they can develop healthy savings habits early on. These can take time to develop, regardless of whether funds are being borrowed from family or the bank. However, the sooner the habit of setting aside money from wages each month is established, the better. When developing a savings plan toward a future investment, make sure you take into account rising property prices – by the time you save a deposit, a property could easily be $50,000-100,000 or more.
Educate yourself about the sales process
Navigating auctions and private treaty purchases can be a daunting prospect, especially if you have never purchased a property before. To ensure you’ve bought well, it’s important to get familiar with different sales methods, as this will give you greater confidence when it comes to making an offer. If you have the time, it’s also worth attending a couple of auctions in advance to observe different styles of bidding. When auction day comes around, stick to your budget, maintain a level head, and remember there will always be another property.
Have your finances pre-approved
Time is of the essence when negotiating a property sale. You can often secure a lower purchase price by having a signed contract a few hours before someone else. Many buyers spend large amounts of time looking for a property only to have their mortgage application rejected. Having pre-approved finance gives you the ability to move quickly and lock in a purchase when you find a good property.
Consult the professionals
Getting advice from a team of professionals such as a buyer’s agent, professional valuer and building inspector will help you find the perfect investment faster. While these experts come at an added cost, they can be well worth the investment. For instance, a buyers’ agent can manage the property search and sales negotiation process on your behalf and will often have access to properties before they hit the market, giving you an edge over other buyers. It’s also worth taking the time to build a relationship with a real estate agent. Even if you don’t end up buying the property they are showing you at present, they have a thorough understanding of the market and the property supply and demand in a given area.
Consider a second-hand investment
Remember, your investment will not be your home. Do not worry if not everything about the property is 100 per cent perfect – a place that’s liveable enough to rent out straight away is often the most realistic and affordable option for new investors. If you have an eye for improvements, investing in a place that needs some renovations presents a real opportunity for equity.
However, when purchasing a property to ‘flip’, beginners should start off with small improvements rather than a complete structural renovation. That way, not only can you take your time saving and planning for a complete renovation but seeing the difference between the property’s actual worth and what you can make it worth enables you to fall in love with your first investment (from a numbers perspective), as you envision its full potential.
Residential property is a great investment option, so first-time property investors should rest assured that any medium-term pain involved in saving for an investment is worth the financial benefits down the track.
This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.