First Home Buyers

APRIL 13, 2016

Setting your property investment goals

To be a successful property investor, it is crucial to develop a game plan prior to purchasing an investment property. This is because goals give you a clear road map of where you want your investment to lead. With this in mind, check out these four steps to help you plan your investment :

1. Do the maths

Sitting down and hammering out your financial position is the best first step you can take. Why? Because you need to understand what you can afford and what sacrifices you may have to make. This is important for the longevity of the investment as well as your peace of mind.

Maintenance funds are great for any future landlords who want to be proactive when it comes to financial preparation. Consider setting aside money on a fortnightly or monthly basis. It is the best way to prepare for those unforeseen maintenance nightmares. In addition to a maintenance fund, take into account various ongoing costs. These can be mortgage repayments, land and water rates, insurances and body corporate fees. This will help you see if you are financially in a position to afford a property for the life of the investment journey. Knowing all costs associated and doing the calculations on the investment will assist with setting your financial goal and will better prepare you for the life of a property investor.

2. Set a time line

Figure out how long you plan on having the investment for. Will it be 5 years, 10 years, 20 years or even 30 years? Having a timeline provides a finish line and you can plan accordingly. Do you want to purchase multiple properties in this time? Set some goals around the number of properties and how long you intend to keep each one. This can help you plan out the benefits and risk associated with your new portfolio.

Sit down with your bank or financial adviser and discuss equity expectations. Plan the time it will take to achieve these equity goals, especially if your long term expectation is to build a large property portfolio. As most investors will know, the first property is always the hardest as it takes a lot of work and planning, however, once you get your first, the second, third and fourth should come easier.  While you can’t predict the future property market, you can set some goals which you can readjust where you need to down the path.

3. List your reasons for investing

Are you investing in property for long term capital growth? Leverage? Income? Tax breaks? Whatever the reason, make sure your game plan is in sync with the desired outcome. Writing down your plan and sticking to it can help you achieve this and make sure you are investing for the right reasons.

4. Prepare for being a landlord

This is one of the largest aspects of property investment that people do not always have a game plan for. Being a landlord means you will have to make decisions on rent, maintenance, leases and tenants. Prepare for this. Have an idea of what type of tenants you want to attract over the course of the investment. As well as this, what rent price do you want to achieve and what sort of maintenance/renovations can you afford?

Connect with your local real estate agents (link) and do the maths on the management and leasing costs for the long term management of the property and tenancy. Learn what fees and charges are payable upfront and what ongoing fees and charges are applicable throughout the management lifecycle. Ask about the fees and charges for enlisting an agent to manage and lease your property. Fees to be aware of are

  • Leasing fees (cost to find a tenant)
  • Management fees
  • Advertising costs
  • Sundry fees and other costs such as registered post and lease renewal charges.

Asking what an agent charges is a good way to establish your budget.

Although property investment can be fun and rewarding, do not get too caught up in the beginning stages of the investment process. This is because much like buying a pet, property investment is sometimes for life and not just for Christmas. If you can afford a property now, make sure you can continue to afford that property down the track– especially if your current circumstances change. Plan and prepare to mitigate your losses should your financial position change over the years. This is because having a back-up plan doesn’t mean you are setting yourself up to fail, it means you are setting yourself up to succeed.

Author: At 28 years of age Luke Spence, Business Development Manager at Beller Group, has been described by his peers as a ‘rising star’ in the real estate industry. Belle Property’s Property Manager of the Year in 2011 and LEASED Magazine’s Young Achiever of the Year in 2012 Luke is young, hungry and focused on understanding the ever-changing property market. Now, with more than eight years in the real estate sector, accompanied by a Bachelor of Business Management and two real estate awards under his belt, Luke is utilising his skills to grow and nurture Beller Real Estate’s extensive client database.

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