How To Invest In Property: 9 Important Property Investment Tips
1. Don’t overpay!
This first property investment tip is a no brainer. Don’t overpay! Prior to purchasing a unit in a block of apartments, it is a good idea to review all the sales history for that particular block. That information is relatively easy to find these days. Some websites like CoreLogic offer comparables previously only available to valuers. They can now be accessed by anyone at a reasonable price.
2. Think forward - infrastructure and transport development.
Being ahead of the curve in terms of future infrastructure can certainly put you ahead of the property investment game. These days there are many websites devoted to finding out which area is going to receive investment in public transportation or increased data speeds, etc.
3. Add value and add some dollars.
Renovations are your friend! Adding value to a property has always been a pretty safe bet so find something you can upgrade a little. This is a straightforward property investment tip and some of the best returns we see are when clients make a couple of changes to the property. By investing $25,000 into a new kitchen, new blinds, new carpet, new appliances their property increased $50,000 in value. This also does wonders for your rental income.
4. Stray from the pack.
Hello my lone wolves. This property investment tip is one for the risk takers, the brave investors. I personally get nervous when my friends (some of whom I haven’t heard from for ten years) start ringing and asking for property advice. It is a sign the market is heating up. However the best time to buy is often when the market is not as hot. It can pay to be the first to jump. But have some guiding hands around you to watch for sharks.
5. Follow the leader… sometimes.
Now I know I’m about to contradict what I just said, but sometimes it does pay to follow the leader – especially if they are knowledgeable, someone you respect and have a proven track record. If I had followed some of the wealthiest and most successful property developers in my circle and bought properties in the areas they developed early on, my property portfolio would be beautiful today.
6. Strategize friends!
The next property investment tip I have for you is to find a qualified professional to look into your current financial situation and goals, and to develop a strategy to achieve this.
In some circumstances, a self-managed super fund may be the best way to purchase a home, while in others, a property owned personally may be more advantageous. Consideration should also be given to any relevant tax implications. I cannot emphasize enough how important this is. Once you purchase a property in a certain entity it is difficult to make changes without incurring significant costs.
7. Crunch the numbers.
You should have a good understanding of the financial implications of any real estate transaction before signing the dotted line. Are you aware of the tax treatment of stamp duty on investment properties? If I claim depreciation when I sell the property, how will this affect my capital gains tax? What about the selling fees? These are important questions to know the answers to when zeroing on your next property investment. Crunch the numbers!
8. Don’t believe the hype.
The trendline for property isn’t always green and up. Sure – If you’re in the fortunate position to hold onto property and ride out the downturn, lucky you! But that isn’t always the outcome for some. If you’re able to get into a property with a five percent deposit, remember that all it takes is for that property to go up five percent, and you’ll double your money. However, if it goes down five percent, you’ve already lost your equity. The calculation excludes all exit and entry costs - which impacts the situation. Unfortunately, this is where most investors slip up.
9. Did somebody say free land?
Our final and possibly most crucial property investment tip. As I review thousands of purchases each year and when I see a client buying a property at close to or below the original construction cost – I smile. And it does happen! Post Grand Financial Crisis we produced reports that demonstrated the original construction cost exceeded the purchase price by our clients. If you ask me, it’s very hard to lose money in property when you get the land for free. Yes, it may take a while for that property or area to grow again, but it eventually will.