PropertyBooks.com.au
The Centre For All You Need To Know About Property Investing
First Time Property Investor
Property investment strategy tips for first time property Investors
By Paul Tooze
If you are a first-time property investor, be aware that investing in property involves a number of important steps, including:
· Educate yourself - read books and magazines and speak to people you truly trust.
· Establish a clear property investment strategy - do you want a property investment that provides sufficiently high rental returns
to be self-servicing or are you chasing capital growth. Your choice of property investment strategy will dictate what kind of property
you buy and where you look for it.
· Thoroughly research the areas you are interested in for first property investments.
· It’s a must to get a property valuation and a building inspection report before signing up to buy your first investment property.
Here are some of the pitfalls why first-time property investor’s investment properties fail to perform:
· The purchase price was too high.
· The property is in an area of low capital growth potential.
· The property is too high maintenance.
· The rent is too low.
· Vacancy periods are too long or too many.
· The loan taken out was structured incorrectly.
· Some tax deductions are missed.
The Australian Securities and Investment Commission has outlined the following recommendations for first-time property investors before buying real estate as an investment asset:
1. Be wary of pressure selling techniques and high pressure seminars
Some sales people can be extremely persuasive and persistent.
2. What are your overall financial plans?
Before investing in any asset ensure sure your decision fits into your overall investment strategy. If you don't have an overall investment strategy then now is the time to develop one:
· Think about what you want to achieve financially and how soon do you want to achieve it.
· Set yourself goals.
3. Understand the risks involved.
Make sure you are comfortable with the risks associated with a particular investment. All investments carry risks. Generally the higher the risk the higher the returns.
· Do you know what the risks are in real estate? Can you sleep at night knowing this? If you can't then perhaps you should invest in an asset with less risk.
· All good financial plans will split your money up against a range of assets in order to spread the risk. Think about this as you think about investing in real estate. Will you have all your eggs in one basket if you buy a particular piece of real estate?
· Remember that all types of investments have cycles of profitability and cycles of losses. These cycles can last for years. Will real estate cycles fit your financial plans?
4. Getting advice
Decide whether you need professional advice. If you're dealing with a financial adviser then make sure they're licensed by ASIC.
6. Do your homework
Find out as much as possible about any investment you are making. Make sure you really understand the pros and cons of the choosing a particular investment asset. Weigh the advantages and disadvantages against your financial goals.
7. Tax and social security issues
There may be tax issues to consider that your real estate agent may not understand. Your tax accountant could be a good place to start to check the numbers and tax issues.
8. Looking after your investment assets
Love your paperwork. Read and keep all documents you receive about your investment.
If your asset is being managed by someone else, then make sure they keep you informed of what is happening:
· Insist that they give you written records and reports. Chase them up if they don't arrive.
· Ask questions if you're not sure. Reputable investment managers will be happy to answer your questions and will expect you to take an interest in your investments.
· Make sure you give all your instructions to a manager in writing. Also tell them what limits they have to act on your behalf.
Source: Australian Securities and Investments Commission
Once you have decided that property investing is the right path for you to follow you will need to set some specific goals and have a plan for achieving success.
