A guide for first time Investors.

 

Investing in property is an exciting way to build wealth. However, working out the right move takes time and a little bit of homework. While property investment is arguably one of the easiest pathways to financial freedom, there are a range of financial and legal obligations that it pays to understand. Property investment is a serious business venture that requires research, planning, good timing, well-informed decisions and the right professional help and support. To get you started, we’ve put together this short, helpful guide to get you on the right track to becoming a successful first-time property investor.

 Set a goal and establish a timeline

Ask yourself what you are hoping to achieve and when. Setting a time frame for yourself can help you stay on track and pursue your goal methodically. Setting goals helps you focus on financially smart investment decisions instead of being swayed by personal preferences. The aim is to maximise your return on investment, so business decisions should inform your goal and timeline. Throughout the process of finding a property, stay focused on what you are setting out to achieve and your wealth objectives.

 Don’t get personal, this is business

Buying your first investment is different from buying your first home. This is a business transaction and should not be confused with an emotional one. The buying process is similar, as you will learn from our first time home buyer’s guide, which can be found here, but this is all about maximising your return on investment and choosing a property that will help you achieve your investment goals as quickly as possible. Instead of choosing a floor plan that suits your lifestyle, you instead need to consider what will appeal to potential tenants and/or future buyers of the property.

 Do your research

Doing plenty of research is important. The first part of this is narrowing down which suburbs work best to achieve your investment goals. Don’t make the mistake of simply looking in your own backyard. The best investment choices may be elsewhere. Examine the past sale prices of neighbourhood houses and local amenities, including schools and transport. Find out whether there are any proposed developments in the area which will affect the property prices i.e. major road or rail works. It’s a good idea to reach out to the local real estate agent for support and advice on the specific area you are considering.

Choosing the right investment property

Buying a property in a location that is unattractive to tenants or oversupplied is a common mistake made by first-time investors. This happens when investors don’t thoroughly research the area they’re considering. To help yourself, investigate the rental yields and capital growth rates in the area to determine its potential as a good investment. Understanding your target market is key. What kind of demographics are attracted to renting in this area? Families, professionals, students? Take a look at other properties in the area to get an insight into the local culture and the type of property features that are currently in demand.

 Focus on widely appealing features

Instead of focusing on personal preferences, you should consider what features will appeal to the widest pool of people. This includes neutral colours and high levels of functionality. Good quality fittings, plenty of natural light and an easy to maintain garden are all universally appealing features. The kitchen and bathroom are the areas that have the biggest impact. Remember that first impressions count for a lot in property – what sticks out for you will also stick out for future tenants and buyers.

 Property inspections are a must

It’s important that you inspect a property thoroughly with an objective eye. Bring friends or family members along to get multiple perspectives on what’s good and what’s not, but remember to consider functionality and wide appeal above anyone’s personal opinion. You should also look for signs of deterioration and try to determine the quality of the build. When you’re serious about a property, don’t skimp on all the checks and balances, and be sure to bring in the experts for a building and pest report.

Plan your finances

Do plenty of research in the areas you want to buy to determine what you can afford and what your finance options are. Consider properties you have shortlisted and before making any purchasing decisions, ask yourself which ones are the most financially feasible and profitable. You should also determine whether any repairs or renovations will be necessary. In certain cases, a renovation can add value to your property and boost returns. Even simple ones like a new coat of paint or updating fittings, fixtures and appliances can go a long way in attracting tenants.

 Do you have equity in your existing home?

Depending on the growth in your area and how long you’ve owned your home – you may have equity to draw on in your own home. For example, if your property is worth $500,000 and your home loan is $100,000, your property has equity of $400,000. Instead of saving for a cash deposit for your first investment property, you may be able to use this equity to meet the required deposit for your home loan.

Can you benefit from negative gearing?

Negative gearing involves borrowing money in a way that results in a loss that can be claimed as a tax deduction. For example, if an investor generates $20,000 in rent each year, but has expenses of ownership totalling $25,000, the investor can then claim the loss of the $5,000 as a tax deduction. It is always best to speak with a financial professional or accountant for clarity on whether negative gearing can work for you.

Costs of property investment

Ensure you are well-aware of all the costs involved in purchasing an investment property, which includes legal, bank, government fees, taxes and charges, accounting, valuations, council, insurance, property management, advertising, and don’t forget pest control as well as building inspection reports – for peace of mind. Many of these fees like stamp duty, rates, body corporate fees and insurance will vary depending on location and what kind of property you are purchasing.

 Seek professional help

Buying property is a huge step towards financial security and is a great way to invest in your future. It is less volatile than the share markets and, unlike other investment options, property investors have complete control over their asset. But don’t feel like you must do it alone. With the right property management, taking care of your investment can be relatively stress-free. To learn more about why you need a property manager, head here.

 

Remember you can always talk to your local Real Estate team Indien. We can provide more informed opinions on the sorts of returns you may stand to make by investing in the area you are considering, relative to the current market conditions. To find your local  Real Estate office visit Indien.

We hope that these insights have given you a good understanding of the common mistakes in real estate investing and how you can invest smartly in property. Now it’s your turn to explore the opportunities and be a smart investor! 

So If you'd like to speak to one of our friendly Real Estate Investment Firm or Real estate agents about houses and property for Investment in India, contact Indien office today. Alternatively, you can simply visit our Real Estate page and search for properties and homes for Invest in India .

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