Anyone can build a property investment portfolio if they have the finance, but establishing a successful one, can prove much more difficult.
Many of us dream of the house, boat and early retirement spent galivanting around the world.
But reality is not so simple, and the outcomes, not always rosy. Whilst the successes stories are there, so too are the big investment fails.
So what’s the secret to ensuring your investment path is a prosperous one?
The truth is - there's no big secret. Sure, sometimes it’s luck - right property purchased at the right time - but more realistically, it takes some serious strategic planning and most of all, patience.
We look at some tips to consider before getting started.
Is it the right time for you?
The sooner you start, the sooner you will be investing into your financial future. However, investing is a commitment, and not a short term one.
You need to feel comfortable in your financial position and ready to take on this kind of commitment, the wins and the losses.
It may not seem the obvious thing to consider, but your age is very important in helping you understand what kind of portfolio you need to build to realise your goal.
For a 30-year-old investor, looking at saving for his or her retirement, building properties or purchasing land with development potential may be a worthwhile venture as the funds won’t be needed for a possible 35-40 years. However, for someone fast approaching retirement, with no great capacity for “sitting on an investment”, it may not the right choice.
What is your goal?
If you have a goal, you already have something to work towards.
Think about where you want to be in 1 year, 2 years and more importantly, in 10 years. When do you want to buy your first, second and third investment property? Setting yourself realistic goals will help keep you on the right track and will allow you to measure how you are going.
Do your research
Know where you want to invest. RP data is there for your use and will give you plenty of information on potential areas you might be interested in.
Tracking suburb growths, sales trends and rental demands is imperative for you to know. The best investors know the market inside and out and are “in” the market even when they are not buying. Try attending auctions regularly to keep in the loop.
Take the plunge
Although critical, knowledge and research aren’t everything.
You need to be ready to take and action and at times, risks. Let’s face it, you’ll never know everything there is to know about investing, so at some point, you will need to judge when your strategy is “good enough” to implement and dive into.
There is no point in having a world of knowledge but not using it.
Don’t make your first, your last
The first investment you purchase may quite possibly dictate what your future portfolio will look like. You can’t afford to be set back before you have even started!
Get it right and you could be retiring much sooner than you thought. Get it wrong, and you could spend the next decade trying to dig your way out of an investment portfolio mess.
Spend time planning the purchase of your first investment property by analysing the property’s investment potential. That is, verifying the rental income, expenses, financing, overall benefits (e.g. cash flow, capital growth, returns).
Diversity
A good investment portfolio should be comprised of different sized, priced and types of properties in a variety of different locations.
This will provide you with much more flexibility when it comes to selling and freeing up equity. Don’t be afraid to look into units and apartments along with the stand-alone properties.
Have a strong support network
No matter how wide your knowledge of investing is, chances are you’ll need some advice from professionals at some point- so have them at hand.
A licensed buyer’s agent, though accompanied with a cost, could be your best friend on your investment journey. They are able to uncover off-market deals, new listings and hot properties via their very established and priceless networks.
It may take you months or even years to understand your local property market, but with the help of a buyer’s agent, you could end up saving yourself a lot of time, and maybe even some grey hairs!