Buying Right: Investment Wise
Property is at the heart of successful investing, but there are as many traps as there are opportunities—so how do you go about ensuring your investment is a boom rather than a bust? Even in a market amid much debate, successful investing hinges on the same principle as it did 20 years ago: buying the right home is key. If you get this right, the benefits of buying for investing are immense.
Head Over Heart
This is the simplest tenet yet also the most common stumbling block for first timers. The simple truth is that buying a first home to build a life in could not be more opposite to buying your first investment property. In a home to live in, you’re likely to be swayed by those quirky features that make the house a home. But when it comes to investment property, you’re aiming for a well presented blank slate for someone else to put their stamp on. A lick of paint and some clean lines will go a long way, but don’t take it much further than that.
Unlike buying shares and other investments, property value isn’t absolute. A number of factors can come into play, and ultimately, it is only worth what someone is willing to pay for it. In order to best calibrate your sense of value, you’ll need to conduct some extensive research over time, visiting properties, attending auctions, and speaking with agents. Without this knowledge, you’re at risk of buying too high and missing out on capital gain. The benefits of buying for investing are only tangible if you’re strategic in your approach.
Buying, Not Selling, is Key
It’s quite easy to fall into the trap of thinking that housing will always increase in value. While a steady profit is common, it cannot be relied upon in totality. Holding out for that golden time when prices suddenly spike and you can sell for a fortune is unrealistic. The most solid route to property profit is through buying right in an up and coming area, and perhaps adding some of the polish yourself through renovations and additions. Talk to your agent about any vendors who may need to sell urgently.
Listen to an Expert, Not Hearsay
Everyone has to start somewhere, so we are all new to the property game at some point. Rather than try to navigate the wealth of information out there without any solid direction, chat to a consultant, coach, or personalised agent who will be able to lay the foundations for you. They’ll be well versed on the current opportunities of interest, trends, and best investing practices, rather than outdated tip offs.
Know Your Finances
Investing carries a different risk to banks than owner-occupying, and as such, the lending criteria may be quite different to your expectations. While you may only need a 5–10% deposit for a home to live in, investment deposit may need to be higher so that your loan to value ratio (LVR) comes down. Talking to a professional will also put you in good stead for understanding what fees and costs you can claim on tax, and how your can utilise equity to your advantage to build your portfolio over time. Buying right is not a skill that comes overnight.
Buy With Consideration of Your Area
You may have found a unit that’s in a desirable neighbourhood at a reasonable price. A smart investment, right? Now consider that the area is full of families rather than couples, and there’s an oversupply of units compared to houses. Now it seems like less of a good buy. It’s a common pitfall to be so convinced that you’ve nabbed a bargain, that you overlook the potential red flags. Know your demographic, their buying tendencies, and your strategy for the area, and buying the right home will be possible. Perhaps you want to purchase a block of land in an area that you expect will appreciate quickly. Perhaps you need a steady rental income to fuel other investments, your own rent or even your mortgage.
Buying the right home for investment is a business decision, not an emotional one. It has got to have the features on paper, as well as the physical pull when you walk in the door. A rational approach, working out the figures you expect to make versus what you must invest, and weighing up the pros and cons, is the best way forward.
