When you make the decision to buy an investment property, it’s natural that you just want to dive right in.
But in practice, your first steps into property investment can be overwhelming. With so much conflicting information out there, it can be difficult to know what’s relevant to your situation. To help you get started, we’ve compiled a list of our top investment property tips for beginners.
1. Start with a solid strategy
Your personal situation and your property investment goals aren’t like anyone else’s. The property that’s right for you is the one that’s best suited to your investment objectives. That’s why it’s so important to start with a strong property investment strategy in place, which should take into account:
Your property investment goals
What matters most to you, and what are you looking to achieve through your portfolio? You might be focusing on accessing long-term capital growth. Or maybe you’re thinking more immediate-term, and want a property that provides regular income now. Having a clear goal is the first step to a successful real estate investment.
Your financial situation
Investing in property isn’t about luck: it’s about being prepared. This doesn’t just mean saving a deposit; it also means having the right support systems in place so you can continue to hold your property as your financial situation evolves. What cash reserves do you have available? Do you have a sufficient buffer to account for property expenses and unexpected situations like emergency repairs? Are you expecting your financial circumstances to change in the short-to-medium term? And, if so, how will this impact your property plans?
Your tolerance to risk
Your tolerance to risk is important in planning your investment. A successful property investor has to be comfortable with the level of debt they’re taking on, and the timeline for seeing returns on investment. For example, a first-time property investor with a smaller cash flow buffer may not have the appetite to pursue higher-risk strategies, such as property development. For them, acquiring an investment property in a growing suburb may be more suited to their current financial goals.
2. Don’t limit your search
It’s good to have a clear plan in mind when looking to purchase your first investment property. But don’t be so restrictive in your search that you overlook alternative, and potentially better, options.
Many property investors enter their property search with a specific suburb in mind—but your desired location might not always be the right match for your property goals.
We see many beginner investors fall into the trap of purchasing an investment property close to where they live. While limiting yourself to the familiar might seem like the logical thing to do, this strategy can work against you, restricting your opportunity to venture into suburbs experiencing greater demand.
It can also increase your exposure to risk, as you run the chance of both your current home and investment property both being impacted by movements in the real estate market.
3. Larger properties don’t always mean better value
When it comes to property investment, keep in mind that size doesn’t necessarily correspond to property value.
For example, some investors may consider buying a larger, more modern house further out from the city as their best investment option. After all, these properties are often newer, and they have more land available.
But a larger lot doesn’t always equal more value. While a bigger home on the outskirts may seem more attractive at surface level, the value of the land may actually be lower than a well-located lot in closer proximity to the city, where the supply of land is much more limited.
In some cases, a smaller, established property closer to the CBD may offer a better land value advantage.
4. Engage a good finance broker
As a first-time property investor, the process of financing your investment property can often be overwhelming—especially now you’re having to think about structuring multiple loans.
This is where it can be incredibly valuable to engage a finance broker who has experience assisting investors. They work with you to understand your property goals and have the knowledge and tools available to match your needs to the right lending products. A good broker will recommend investment lending solutions that work with your long-term investment strategy, while keeping your immediate situation in mind.
They will also have experience in navigating fluctuations in the market and can advise on how best to manage your investment loan when lending conditions change.
5. Manage your property proactively
Buying an investment property isn’t a set-and-forget strategy—the work doesn’t stop once you’ve secured your property. The real estate investors who get the most from their investment property are those who take proactive steps to manage and optimise their investment as they go.
This is where an experienced property manager is critical.
It’s not just about collecting rental income on time. A good property manager will work with you to put strategies in place that ensure your property’s value continues to stay in line with property market conditions, in turn maximising the income you earn.
It’s important to choose a property manager who’s on the same page as you: one who understands your goals, protects your property’s value, and identifies opportunities to enhance your portfolio’s performance.
6. Know your property tax entitlements
As a property investor, you’re now using your purchase to earn income, which means that you may be entitled to certain tax deductions on your property.
Knowing the tax deductions you can claim is critical in maximising the return on your investment, while minimising short-term cash flow losses as your property grows in value. This is where it pays to engage a good accountant. An experienced property accountant knows the specifics of how to correctly claim tax deductions on your property, which will help you to minimise holding costs while maximising your property’s returns.
The right investment advice is fundamental
There’s a lot that you can do as a new property investor to help you make the right investment decisions. The key is investing in sound advice.
By following these investment property tips for beginners, you can make more informed decisions that will benefit you in the long term.
At Momentum Wealth, we work with investors to help them identify and develop the right strategy to reach their property goals. This means you start your property investment journey on strong foundations. Together, we help you make smarter choices that are in line with your investment goals and your unique situation, so you have confidence that you’re making the right decisions from the outset.
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Looking to get the right start with your first property investment? Request a free consultation with our team to learn more about our strategy services