Don’t crash and burn

The Advertiser - Real Estate - - The Crescent, Crafers - THE MON­EY­MAN

DO you feel the need, the need for speed? That’s fine if you’re a jet fighter pi­lot, but if you’re a po­ten­tial prop­erty in­vestor, now may be a good time to sit back, switch off the af­ter­burn­ers and take a care­ful pause.

Just like Mav­er­ick, the pi­lot played by Tom Cruise in the 1986 cin­ema clas­sic

who’s dan­ger­ously dar­ing ways brought him un­stuck, any­one rush­ing into real es­tate right now with­out proper re­search and plan­ning could crash and burn.

There has been lots of talk of hous­ing booms lately, with prices in Syd­ney surg­ing more than 13 per cent this year alone and some other states up about 7 per cent. It’s easy to get caught up in the hype, but real es­tate is a long-term in­vest­ment, and a few per­cent­age points here or there to­day won’t mean much a decade from now.

A long and dis­tin­guished list of in­vestors have suf­fered over the years af­ter rush­ing to buy a prop­erty with­out do­ing their home­work, and the re­cent rises have drawn a flood of spruik­ers out of the wood­work claim­ing we are in a tar­get-rich en­vi­ron­ment, par­tic­u­larly for peo­ple with self-man­aged su­per funds.

Here’s a five-point check­list to com­plete be­fore you even think about buy­ing:

Re­search pre­vi­ous sales in the area, so you know what a fair price is.

Get fi­nance pre-ap­proval from your lender, giv­ing you cer­tainty when it comes to buy­ing.

Have a limit on what you’re pre­pared to spend and don’t de­vi­ate from it.

Al­ways treat a prop­erty in­vest­ment like a busi­ness de­ci­sion, not your own home.

Work out the real cost of the in­vest­ment - in­clud­ing ex­penses such as in­ter­est, coun­cil rates, insurance and prop­erty man­age­ment fees.

‘‘Th­ese rules are not flex­i­ble. Ei­ther obey them or you are his­tory,’’ said Mav­er­ick’s com­man­der in It’s not quite that se­ri­ous in the prop­erty in­vest­ment game, but when you’re deal­ing with as­sets cost­ing hun­dreds of thou­sands of dol­lars, mis­takes can haunt you for a life­time.

Don’t be tempted to act based on what oth­ers do or say, par­tic­u­larly spruik­ers. You don’t want your ego writ­ing cheques that your bud­get can’t cash.

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