Thursday 6th October 2016

Some guidance on how to start your property portfolio.

 
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Whether it's renovating, sub-dividing, or building multiple units on numerous blocks - any investment strategy is built on two pillars. Research and discipline.

However it seems securing a regular income stream via rental returns is not the primary reason young investors are seeking out property. Investor/tenant surveys are showing record low interest rates, volatility in share markets and the perceived security of bricks and mortar was driving buyers to purchase more investment properties.

Yet not surprising, the findings indicate capital growth and rental returns in combination are overwhelmingly desired. So how do these ‘Gen Y’s’ do it? 

Some buy properties for less than a bank valuation and with a positive cashflow. Some look for properties with the potential to sub-divide with the belief it is more profitable than renovating at the lower end of the market. Some simply look for bargains at the right times.

Want your slice of the pie? Consider these four crucial steps:

Get seriously saving.

Work hard and keep putting that money away, because in reality, if you cant save for a deposit you probably wont be able to make home loan repayments. Consider living at home with parents while you save, or sharing a rental with 2-3 house-mates. Cut back on the wants and stick to the needs.

Stay focused. Investing in property is a business decision, not an emotional reaction. Get clear about what you want to achieve, set a date to achieve this goal, and identify the milestones you need to do to get there.

The beauty of the housing market is once you can get your hands on that first house, over time you can obtain equity from it to empower you with your second and third.

Do the research.

Research is the key factor in buying an investment property. Browse online articles and the latest statistics reports, track interest rates, speak to real estate agents to gauge the market. If we’re riding a wave, it’s probably not a good time to be buying.

When it comes to equity, it is always in the land, the home itself depreciates. Always understand it is very possible to buy a house, renovate and overcapitalise - something to be very careful of.

Understand your attitude to risk, as your risk profile will determine 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.

What and where to buy.

When it comes to property investment, never let your heart get in the way of where you want to be. It all comes down to the black and white figures and what the market is telling you, what the market supports or doesn't support.

Look at buying properties for less than a bank valuation and with a positive cashflow (where a property income is higher than its costs). Meaning buyers can build up equity and borrow more from the bank for future investments. With neutral and positive cashflow properties you could accumulate hundreds of them and they service themselves. Whereas you cant necessarily go and buy 30 negatively geared properties.

This method could potentially take that risk factor away that if a job doesn't work out or a partner can no longer work, it may not be a case of selling the family home because it’s no longer affordable.

Stay informed.

Use the tools available to you to make informed decisions. Explore realestate.com.au/invest for some valuable insights.

Being informed also means being wary of get rich quick schemes and property peddlers. If someone is promising you guaranteed returns and overnight riches, walk away; the only person getting rich is them.

There’s no such thing as a property psychic and while there are tried and true methods to research, no one can make guarantees. Understanding your tolerance for risk will help you shape how much you’re willing to take on over the shorter and longer term.

If you’ve got any questions to help you along the way then contact us on (08) 6200 0269 or reception@finance365.com.au for some more friendly advice.

 

 

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