PROPERTY INVESTMENT
If creating a winning property portfolio was easy, everyone would be doing it. According to Property Fit author, Luke Harris, the biggest reason most investors underperform is they ignore 80 per cent of the work. “Instead, they focus on the last 20 per cent – the technicalities surrounding purchasing a property,” he says.
Luke says that once you have your mindset focused, your goals set and an understanding of the commitment involved, you’ll see that the nuts and bolts of property investing – while important – are secondary.
“Successful investing is a skill that can be learnt,” he says.
If you’re just starting out in property investing, take heed of his tips...
UNDERSTAND YOUR ‘WHY’
Most investors don’t achieve desirable results because they put ‘how’ ahead of ‘why’. You need a clear understanding of your purpose for investing. People invest in property for many reasons, so why are you? To build a family legacy? To retire? Whatever the reason, knowing your ‘why’ helps you remain committed to your goals, otherwise you’ll never be motivated to pursue your objectives with determination.
SET CLEAR GOALS
Align your strategy with your vision by defining where you are today, then planning the steps to get you to tomorrow. This doesn’t mean a financial plan consisting of various spreadsheets – rather, it involves outlining the steps to achieving your ‘why’. List assets like property, shares, superannuation and savings, then liabilities like credit cards, loans and personal debts. Deduct liabilities from assets to calculate your net worth. This helps your lending broker establish your investment capacity. List financial and personal goals, insert achievement dates and estimate the cost of each goal.
When you know how much you need, you can make choices about your career and lifestyle, and how much you should save to secure your next property. Always invest according to your plan. Review your plan regularly, adjust accordingly.
LEVERAGING YOUR CURRENT MORTGAGE
Once of the best ways to get started in property investing is to tap into the
equity in your own home. If you have purchased a property in the past five to 10 years or more, you probably have some equity in the asset that you can tap into. One of the first things you can do is speak to an experienced mortgage broker and discuss your lending options. They will review your figures and the value of your existing property, and provide you with something called a Borrowing Assessment, which will tell you how much you can potentially spend on an investment property. Of course, as with all investing, accessing the money is only part of a complex jigsaw puzzle. There are a few more important steps to take before diving into another property, but knowing your numbers is a great first step.
ASSEMBLE YOUR DREAM TEAM
Before you invest, it’s essential to assemble your team of property specialists. They have the skills and knowledge to provide you with results-driven advice and should include an accountant, mortgage broker, solicitor, conveyancer, and property manager. In property, it is often who you know, along with what you know, that makes the difference to your results.
TAKE ACTION
With goals documented, strategy in place, an understanding of your limitations and your team ready, it’s time for action! This is the last stage – the 20 per cent – most investors focus on. They purchase a property in a familiar area, but without planning. If they’ve completed some due diligence, they’ve considered property and location fundamentals like stock on market, vacancy rates, infrastructure, population growth and property features. However, it’s more important to consider if the property aligns with strategy and will generate targeted wealth results. Are you investing for capital growth or rental yield, or pursuing value-added strategies like renovation, subdivision or development? Only once your strategy has been confirmed should you move into technical analysis of the property.