Don’t crash and burn
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.