Property can offer a great investment opportunity. Markets are comparatively stable and the likelihood of growth over time is high. Plus, you get to say “my portfolio” at parties, which can be very satisfying.
But how can you maximise your chance of success? We’ve locked down the six best investment property tips to help you get started.
1. Be realistic about your goals.
Investing isn’t as simple as choosing an apartment and waiting for tenants to rock up. You need to start with a plan. What do you want to get out of your investment? It might be long-term growth, a more diverse portfolio or a future home for your kids.
Find out the answers to questions like these – and be honest with yourself:
- How much can you afford?
- What’s your backup plan if things change?
- What will you do when your property is empty?
- Can you exit the market if you have to?
You need to know how much it will really cost to invest. That means looking beyond the deposit cheque to costs you may have to cover for months at a time.
2. Don’t hoard your cash forever.
It’s important to buy at the right time. Markets fluctuate, and this month’s bargain could be next month’s overpriced tear-jerker.
But in the long-term, property is one of the most secure investments you can make. Cash that’s sitting in your bank account will deliver a low return and you’ll have to pay tax on it. Don’t wait forever for a mythical property that ticks every box. Strike when the time is right and make the most of your savings.
3. It makes sense to diversify.
Putting all your cash into one ‘sure thing’ might deliver results in the short-term, but it can leave you exposed. Diversifying your investment may help to reduce that risk – and grow your capital at the same time.
Buying across multiple locations or property types makes sense. You can optimise cash flow, open up options for selling later, and tap into different types of tenants. Splitting your budget can free up equity for future investments, while buying in different geographic areas will give you diverse growth opportunities and more places to stop for brunch.
4. The less glam suburbs can deliver great value.
Ever noticed how Monopoly novices almost always want to buy Park Lane or Mayfair just because they’re posh? They probably have fancy supermarkets and parks with rotundas and good local theatre. But that doesn’t make them a good investment.
Do your research. When you crunch the numbers, you’ll probably find it’s the less-affluent areas that have the highest demand from the biggest group. Look for sibling or middle-band suburbs with access to schools, transport and shops. They’re not always glamorous, but they can offer the best return (and fewer scary luxury tax squares).
5. Let your head have the final say.
It’s so easy to fall in love. Sometimes you can’t even explain it – you’ve walked into an apartment and the original cornice work has sent your emotions into overdrive.
But investment isn’t about romance. You need properties with good checklist that will appeal to your target market. Save the heart for your own home and invest in the places that shout “good business decision” – the right area, the right price and the right demand.
6. You’ve grown your equity – use it.
Getting on the property ladder is often the hardest step. Once you’re there, make the most of it. Use the equity you’re building in your current properties to expand your portfolio.
Making smart investment choices can grow your wealth exponentially. Don’t get cocky – continue to do the groundwork and build a diverse list. Always keep your eye on the market. Be ready to act on great opportunities and you’ll be a property mogul before you know it.
Investing in property can be daunting. There are so many options and your crystal ball is cloudy. Making the right decisions requires a strong understanding of the market – and of yourself. Know what you’re trying to achieve. Be honest about your capacity to buy. Make informed choices and you’ll be expanding your portfolio for years to come.
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.