Property has been a popular route to wealth for Australians for many years. Women are now becoming active investors. As with any investment, there is a risk. Investment is all about identifying that risk and managing it. So you need to make sure that you are not learning the hard way and get it right the first time.
Here are my top 5 tips to be a smart property investor.
Tip #1: Set your goals
It is an absolute must to set goals if you want to achieve anything, let alone a property portfolio. A simple plan written down on a piece of paper can help you remember your goals for property investment and help you move along your property journey.
When it comes to property investing, it is mostly about the approach you take in terms of strategy. Different investors have different goals and constraints. Those will determine what structures you use and the financial strategies you employ. Once you put your plan together you will be in a better position to reach your short, medium and long term goals. Look for fee-for-service agents who can guide you with your investment property journey rather than those who promote stock from developers and get commissions paid.
Tip #2: Analysis and Research
The reason many people fail to buy a good investment property or one that has good returns is because they fail to do their research. Many first home buyers think that following the same route as buying their owner occupied property should get them a good investment property. Investment is so different in that you need to buy based on facts and figures, and take the emotion out of the transaction.
Always buy with the resale value in mind and look to add value to it. Simple examples include kitchen and bathroom renovations.
Tip #3: Finance – borrow using the right structure
Using the right structure to borrow is as important as buying the right property itself. Always keep in mind the following simple but effective tips:
• If you are extracting equity from your owner occupied debt, make sure you efficiently split the loans into tax-deductible and non-tax-deductible portions.
• Have a flexible debt structure to accommodate changes.
• Cross-collaterisation (more cons than pros) Vs stand-alone debts. Always aim to keep your owner occupied and investment property debts separate.
• Never max out your borrowing capacity as interest rates can always go up. Sometimes even a 1% rise in interest rate can stretch your budget and put you in stress.
Tip #4: Property management
A good property manager is essential to manage your property and make you aware of your rights as a landlord. They should help you with finding good tenants and try to minimise the vacancy rate of the property.
Tip #5: Protect with insurance
You need to consider two kinds of insurance whether you are a serial investor or just a one-home owner. One is insurance for the property and its contents, if any. The second is personal insurance to protect you should there be a situation when you cannot work and have a debt against the house.
Follow the above tips and you can build your property portfolio with minimum stress and also reap the benefits of owning it.