Owning It: Valuable Advice for Nervous First Time Property Investors
Congratulations, you have the necessary capital to purchase your first investment property, but now what? It can be a frightening and nerve-wracking experience. There are many different things to consider, and you don’t want to make a mistake. Before you make such a big purchase, read through this article to make sure you’ve thought of everything.
Start with Finances
Before purchasing any property, especially an investment property, you need to know how much you have to spend. This means talking to your bank. When it comes to financing your investment loan you’ll need to consider the following:
- Take time to find the right loan for you. There are a lot of different options out there for financing, so shop around for a loan with good long term interest rates at a reputable bank or financier.
- Get a pre-approved loan. Having pre-approval for a loan amount is an excellent indicator of how much you’ll be able to borrow for your investment property, which means you now have a clear budget.
Do Your Research
The research doesn’t end with finding the right loan. You’ll need to consider the area you want to look at, as well as the type of property. When conducting your research, make sure you consider these key things:
- Do your homework when picking a growth area. Look at past growth in different suburbs, as well as plans for redevelopment in particular areas, like increased infrastructure development. Are there plans for more public transport? Are they building schools and shopping centres? All these activities can quickly boost the value of your investment.
- Consider the type of property to fit your purposes and goals. Generally, it is the land that a property is built on that has the most value, but for a first time investor that can be out of their price range. Residential apartments can be a solid first time investment as they bring in steady rental income.
- Think about the type of tenants you want. Sometimes you’ll be able to buy an investment with tenants already in, but other times you’ll need to fill the property yourself. Do some research on how to attract the best kind of tenants.
Make a Plan to Profit
It’s always worth having a plan when you undertake something big, like an investment in property. Once you’ve got your finances organised and know the areas and types of property you want to consider, you’ll need to plan how it’s all going to play out. You may want to include the following items in your plan:
- Property Search: Ask yourself how you going to find your investment property, such as: will you enlist the help of a professional? Do you want to use the internet? Are you going to talk to local real estate agents? Or, will you enlist a combination of all of sources mentioned above?
- Appraisals: Don’t trust the real estate agent selling a property for all of your information. Get your own expert to appraise the property and give you information like the value for renting.
- Due Diligence: This is crucial. Any new property investor needs to make sure they have all the right information. Most agents will let you sign a contract subject to the building inspection, which means you can nab that great apartment quickly, without compromising on due diligence.
Make an Offer and Be Ready to Negotiate
There’s always wiggle room when it comes to property prices on both sides. Before you make an offer, consider these factors:
- Your Max Price: Figure out how much you’re willing to spend and stick to it, but don’t be tempted into going higher during negotiations.
- Emotional Attachments: At the end of the day, this is an investment, and you’re not going to live there, so try to stay detached. If you’re emotionally involved, you will likely end up spending more that you wanted on the property.
Purchasing an investment property is a big decision, but you can avoid making mistakes by staying focused on your goals and avoiding decisions based on emotion. Remember to do your research and stick to your plan.