Naked Real Estate chief executive Brendan Leahy shares his top 10 tips to help first-time investors on their property journey.
Set clear financial goals
Set some tangible goals around areas like return on investment, cashflow and timeframe; then you have a framework to assess each potential investment. Just because someone says it’s a good investment, doesn’t mean it’s right for you and the achievement of your personal financial goals. Take into consideration the ongoing costs of purchasing an investment property, including additional rates and insurances, property management fees and general maintenance.
Treat it as a business
Owning an investment property is much like owning your own business, with you at the helm. Good structure and management is essential to keep everything on track, so if these aren’t in your skill-set, it might be worth hiring someone who can manage this aspect for you. While it looks easy from the outside, having a tenant sign a lease and then collecting rent isn’t the be all and end all. It’s important to have an independent party such as a property management company provide that assistance and protect your property.
Before embarking on your property investment journey, get yourself up to speed with all things property as much as possible. Family and friends will often be the first to pipe up with advice but it is worth seeking out professionals to guide you in the right direction.
Research the market
In your knowledge quest, also focus on researching the market, particularly those areas where you intend to invest. You should attend home opens and speak with selling agents who can provide you with recent sales results in the area and what is happening in that particular rental market. You can also go online and visit property websites, which often provide valuable and free suburb and property information like the Naked Real Estate blogs. Landgate also offers a property interest report, which you can purchase on a property before you put in your offer.
Capital growth is fundamental
A sensible approach for your first investment would be to look for locations where property values have shown solid and consistent growth over the long term. Start your search with properties within 20-30km of Perth and properties with unique aspects like ocean or city views. You shouldn’t pick from the top or the very bottom when looking to invest. Remember, investing in property is not for the short term.
Inspection is a must
You don’t want to be stuck with a property lemon, so it’s essential to inspect every property thoroughly before thinking of putting pen to paper. Rope in some family or friends to join your inspection to give an unbiased opinion, then bring in the experts if you’re getting serious.
Cash is king
It’s extremely important that you don’t over commit financially and that you can afford to own, manage and maintain your investment property. Prepare a budget to get a grasp on your situation, as well as allow for contingency or changes down the track. Bear in mind that there may be periods of time where your property is vacant, therefore you won’t be receiving any income, yet you’ll still need to cover your mortgage payments. Always ensure you have a “buffer.”
Beware of rental guarantees
If it sounds too good to be true, then it probably is. It sounds good in theory, but in reality, often have a dubious value. In addition, they can often be hard to sell later on, so you’re probably better off finding another property that makes financial sense without the guarantee.
Don’t do it all yourself
As a first-time investor, it makes sense to get all the advice and help you can. If you need to pay an expert, simply look at the cost as mitigating your risks and adding to your education. It is worth making a small investment at the beginning of the journey to avoid any costly mistakes down the track.
Don’t rush into anything
Take your time and consider your options before making any decisions. There will always be another property.