3 Key Considerations for Successful Property Investment
Fundamental Property Investment Melbourne
Property investors need solid foundations to base their decisions on, that should comprise of the right information and property market know-how to be successful. Otherwise, it’s just a game and the players are only gambling. Here are some of the fundamentals to profitable real estate investing.
There are people who offer what they call “free advice” these days which buyers and investors mistakenly accept without thinking twice. One contributing factor is the lack of regulation in the industry to divide those who qualify as professionals and those who don’t. As the growth of the industry soars, it has also opened doors to anyone who wants a piece of the real estate pie. It’s not surprising to know the property “experts” have greatly increased as well from selling agents, to property spruikers, to wholesale marketers and more. It’s even common to have “mum and dad” tout properties and strategies they’ve heard about from the media, free seminars and whatever experience in property buying they’ve had – for some, that sometimes means only buying the home you’ve grown up in. Financial planners and professionals from other fields are joining in as well. While some are well-meaning, others are in it for themselves.
In this unfortunate scenario, it often involves pitching specific properties to the people listening and often ends in them buying without the property matching their needs and wants. Many of these advisors have commissions or fees tied with the properties they recommend, so be wary when someone gives you free advice. These people are primarily looking out for the sellers’ best interest, as opposed to yours. A couple of popular tactics used are “research houses” which are masked real estate agencies and membership offers to investor groups on exclusive or special deals. Buyers often don’t understand that so called ‘free Advice’ is in fact “sales advice”.
Strategies used by ‘big-time’ property investors may not suit everyone but those who are new to investing often don’t know this. They pitch to investors who say they want to use these strategies because of the potentially large profit to be gained from them. When they begin to follow these methods, they realize later how stressful it is if they aren’t comfortable with high-risk tactics and opt to change or adjust their strategies. They can also have lost money at this point.
Awareness of what your risk profile is helps you decide on strategies matching your level of risk-tolerance, avoiding sleepless nights and other effects of unnecessary worry. It also protects you from losing your hard-earned money. High-risk strategies should be left to the seasoned investors who have money they’re willing to lose.
Risk profiles range from conservative with the lowest tolerance for risk, to cautious, prudent and assertive with the last as the most tolerant of risk among the four.
You should also decide on the level of involvement you want in your property investments. Would you class yourself you passive, medium, or active? The first two would require hiring professionals such as buyer’s agents or buyer’s advocates to research and provide you with the right information, and, at times, make decisions for you. Being active means doing the work yourself and having professionals evaluate the information you’ve gathered, your decisions and plans.
You also need to decide on what type or properties you want to focus on, adhering to your risk profile. Each type has varying levels of risk involved. Consult with your strategist or buyer’s agent about the risk associated with residential, commercial, industrial, and short stay properties.
Entry – Consider your present financial situation from your income to borrowing capacity and other factors which directly affect it. This will determine your budget which should be reviewed from time to time. Remember to have income protection or any fall back in case of emergency.
Hold – To achieve your financial goals, you must hold on to the property to allow for capital growth. This often involves medium-term to long-term strategies. While short-term strategies can also be effective, they have a much higher level of risk and entry often requires greater finances and the ability to exactly pick the timing cycle in the market. If you consider yourself risk-averse to moderately tolerant, it’s important to take note that holding investment property for long periods of time is necessary for optimum gains.
Techniques to holding properties include renting out the property, appropriate insurances, sound accounting, maintaining the property, saving buffers and more. Make sure you double check with the legal authorities on how you can you have your property rented as some options are not available for certain areas.
Exit – How you exit depends on your age, how many properties you own, your lifestyle requirements and how much time you need to fund your retirement. You should consult with your accountant or financial planner as they can advise you on tax and superannuation regulations.
Property investment requires the right information and independent expertise. At Property Mavens, we provide independent, non-biased advice and always put your best interests first. For more details, contact our team of buyer’s agents in Melbourne today.