Tips To Master For Success In Property Investment
If you are looking to maximise your success in property investment, then here are 8 great tips for buying an investment property.
1. Develop a strategy right for you
A list of investment property tips for beginners wouldn’t be worth it’s salt if it didn’t highlight the importance of developing a personalised investment strategy. This strategy should be tailored to your individual standards and goals. So ask yourself, what do you want to achieve through this investment property?
This strategy should answer questions such as ‘what is the expected cash flow? What are a good yield and capital growth for me? and ‘what price point can I purchase at?’ It should also set your end goals. What are you trying to achieve in 5, 10, 15 years?
Should you have achieved a certain amount of passive cash flow, or are you wanting to achieve a certain amount of net assets that you can diversify into different investment classes? Developing a personalised strategy will take some time and shouldn’t be rushed.
However, once this strategy is developed, the next steps of suburb and property selection become much more accessible. When you have a set of guidelines, suburb and property options will be refined into a shortlist. The properties and suburbs on this shortlist should align with your investment strategy, maximising success in achieving your goals.
2. You are doing the proper research?
The second bit of advice in this list of property investment tips may seem a bit obvious:
Research to find out what the short-term and long-term growth drivers are in those shortlisted suburbs. We recommend considering factors beyond just population growth and the proximity to schools, hospitals, etc.
Our rental property research considers about 35 quantitative or qualitative real data factors, such as average vendor discounting, stock on markets, building approvals, online search interests, and more!
While you might be looking at websites such as realestate.com or Domain, we recommend not limiting your research to these sites. These websites do not allow you to comprehensively compare and analyse the 3,000 statistically reliable suburbs in Australia — at least not in a reasonable amount of time.
Using these websites exclusively may also mean you miss out on some great property deals and rely on data manipulated to align with the agendas of these organisations.
So when doing research, make sure you’re doing it right!
3. Understand negotiation
While this may be a list of investment property tips for beginners, it is still essential to understand the basics of negotiation when entering into a contract. Whether it be through auction or private treaty, there is a science to negotiation with the agent. And the more of it you can master, the better position you will be in.
Make sure your concerns with the property are addressed in this negotiation and stipulated in the contract. This can range from building and pest inspection to finance clauses and many more!
4. Getting your finance sorted
Another critical bit of advice in first investment property tips is having your finances organised and ready so that you are in a position to make the call as soon as an opportunity presents itself.
This involves having a mortgage broker (someone who can connect you to your lender) who has experience in property investment while also getting the right product from a lender tailored to your specific needs.
Getting the right product from a lender involves a combination of factors, including low yield, interest-only or pni, the length of the term, offset/redraw, among others. But a good, investment savvy mortgage broker will help you acquire the right product that aligns with your resources and goals.
5. Pre-settlement inspection
This might seem like a relatively essential, prominent piece of advice for a list of real estate investment tips. The pre-settlement inspection is crucial for securing a property you wish to invest in and ensuring it is in good, liveable condition.
However, many people don’t know that this can be done without even leaving your own home. A pre-settlement inspection can all be done by others on your behalf.
This means that you shouldn’t limit your investment options to your backyard just because you know you don’t have the time to run around the country, inspecting every suburb. Expand your horizons and be open to the potential of suburbs all across Australia!
6. Selecting the right property manager
A good property manager will be critical in your success, both before settlement and after. A good property manager will take advantage of every opportunity to maintain cash flow and maximise the property’s potential.
For example, a property manager should be in the process of finding tenants even before settlement. This means that the day after you have secured keys to the property, you are passing them over to the new tenants.
A good property manager will also be able to aid you in reducing maintenance costs. After settlement, the ongoing prices are often hard to avoid, but minimising these expenses is handled through a property manager. But more of this in tip 8.
7. Maintain cash flow template
While most of these property investment tips have focused on pre-settlement, some work is also to be done after property acquisition. It is essential to maintain a cash flow template. It would help if you were recording and filing everything that is coming into your pockets through this investment property and everything that is going out. This can range from rent, insurance, landlord costs, maintenance, rates, and more.
Knowing and understanding this cash flow means identifying how a positive cash flow is being achieved (so that you can replicate it in the future). You can quickly identify costs that are too high and minimise these before any significant loss. Staying on top of this will make your life easier and give you every chance of success in your property investment journey.
8. Reduce maintenance costs
Another post-settlement tip is reducing maintenance costs. If you’re buying houses with a high land-to-asset ratio, these costs should be relatively minor compared to your return on the property (these costs should range between $1000-$1500 p.a.) However, a crucial part of limiting these maintenance costs involves knowing where these expenses come from and getting on top of them early.
Maintenance costs can stem from electrical appliances, water leaks, drainage and general plumbing issues, hot water system failures, and toilet system failures.
Many of these shouldn’t be too expensive, as long as you address them before they have the chance to evolve into a bigger problem that requires a more expensive solution. Also, the cheapest option may not always be the most cost-effective, as many of these jobs need thorough, efficient work to minimise recurring problems.
Remember, a good property manager will do most of the work here, organising quotes for your viewing and booking electricians, plumbers, handymen, etc., once you make the call.
Stay on top of these costs, and handle them as soon as they arise!