Purchasing your first investment property comes with a mix of emotions. On the one hand, there’s the feeling of infinite possibilities – how far can you go to increase your wealth and financial security, will you be able to retire earlier or increase the quality of your lifestyle?
And then of course, there can be a little apprehension – will your investment pay off? What property investing mistakes do I need to avoid? Fortunately for first time investors there’s plenty of expert advice to be gained from those who’ve forged the property investment path for decades.
Here are five golden rules for first time investors to follow from the team at Providence:
- Leave emotions at the door
The best investment property will, more often than not, be a dwelling that you wouldn’t necessarily live in yourself; but will yield healthy returns and increase in value. Hence, when shopping for an investment property, you have to make a conscious effort to park your emotions – looking less at aesthesis and more at fundamentals like location, scarcity and practicality.
Many fall into the trap of trying to use their investment property as a holiday house, which doesn’t usually work. Holiday homes often have poor yields, less capital growth and require more maintenance. Love your investment property, sure, but stay focused on what its purpose is for you — ultimately, to build wealth.
- Lean on experts
The best investors are well-researched, do their due diligence and always turn to the experts rather than accept the well-meaning but often substandard advice they receive from friends and family.
But remember, it’s extremely difficult (and risky) to manage everything on your own.
Throughout the process of purchasing your investment property, it’s important to seek advice from high-quality professionals. Find an accountant you can bounce ideas off, a good solicitor who specialises in property, and consider using a group like Providence to assist you with finding and negotiating a property to suit your goals.
- Think outside your city
Writing-off interstate investments is one of the greatest missed opportunities we see people make. Australian states, cities and suburbs are not performing equally – some are peaking, whilst others are starting to seriously heat up. Locations such as Brisbane and Hobart for example still have plenty of potential for growth.
If you’ve done your due diligence, researched the market where you intend to purchase and have a good team behind you to help secure the sale and manage the rental – then there’s little reason for striking interstate properties off your shopping list.
- Don’t over-borrow
Most investors can’t afford to be short-sighted when it comes to borrowing. For example, investors borrowing at 90+ percent can find themselves in a pickle when interest rates go up and their rental returns don’t. Other changing circumstances need to be considered too – large expenses like weddings can bring on financial strain, whilst childless couples starting a family need to consider whether they can afford their mortgage if they drop to a single income.
Key takeaway – borrow smart and give yourself a buffer.
- Shop for value
The core objective of your investment is to make money, so shopping for value is crucial to kickstart the process right. Shopping for value includes understanding the market in real time, as well as how it’s performed historically. You should aim to secure a deal that’s in-line with trends or (even better) undercuts the average price. If you pay too much for your investment it will take longer to turn a profit and for you to achieve your goals, so make value-shopping a top priority!
Are you currently looking to purchase an investment property? Learn how we help property investors buy better and faster, for the lowest possible price (anywhere in Australia)….
You can be sure you will avoid making property investing mistakes when you work with property research specialists such as the team we have at Providence.