Many of our clients ask this question and our response to them usually is – “What are you really trying to achieve?”
Some people only want to invest in property because they see advertisements in the newspapers crowing some of these lines:
- Let me show you how I made $1 million in 24 months;
- How to buy $1 million of property with none of your own money!
- How you can make $50,000 in just one property deal;
- Property doubles in value every 7-10 years.
All of these types of adverts promise quick and fantastic returns but remember if it was really that easy everyone would be doing it!
Some investors go on holidays, call into the local real estate agent and all of a sudden they have purchased an investment property “because the agent said we’d double our money in the next 8 years”.
Our advice will always be to do your research in a detailed fashion and to remain wary of any advertisements promising the world.
So if you have never invested in property what should you do?
- You should buy some basic property investment books by wonderful authors such as Jan Somers and Margaret Lomas. They have spent many years in the industry and have bought large numbers of investment properties. Their advice is extremely valuable and whatever money you spend on their books will be the best investment you can make. These books will contain information about positive and negative gearing, what is positive cash flow, the importance of capital growth, questions you should ask when choosing investment properties and dealing with property managers and much, much more.
- You should subscribe to a free email property research newsletter by Terry Ryder on his website www.hotspotting.com.au. Terry has been an independent property researcher for many years and his study of demographics, infrastructure spending and investor behaviour is extremely important for helping to locate where your searches for investment property should start. Terry provides a wide selection of property reports for a small fee on his website. I consider some of these reports the best value-for-money reports available considering the amount you may spend on an investment property.
Investing in property is all about doing the “hard yards” to ensure you have enough decent information to make a comfortable decision about property. A lot of investors will spend weeks researching and haggling on a car purchase, but will not spend the same amount of time researching the purchase of an investment property with 10 times the cost!
When you become interested in a property “do the numbers” to ensure you can afford it. “Stress Test” these numbers to ensure that if you don’t have a tenant for your property, or if interest rates rise, or if you lose your own employment income, you can still afford it. Before making an offer to purchase a property, get a second opinion to ensure you are comfortable of its market value (even if you have to pay for this). When it comes time to make an offer make sure you qualify the offer as being subject to specific bank finance approval, appropriate building and pest inspections and subject to a bank valuation of no less than $xxx,xxx.
In property, knowledge and research are the name of the game! The investment you make in research and furthering your property knowledge could save you tens of thousands of dollars.