To help you begin your journey of property investment, here are eight steps to starting a property portfolio on a solid ground, without losing your mind:
Check your finances.
This can be as simple as listing all your assets, including incomes and work out your expenses. This will give you an idea of how much cash you have available to invest. Don’t immediately assume that you can’t afford to invest. As long as you have a stable and reasonably good paying job with solid employment history, you shouldn’t have a problem getting a loan.
Get a pre-approval.
You can get pre-approval through your lender directly or through your trusted mortgage broker. Going through a broker before applying for pre-approval can be beneficial if you’re not sure you’re financially ready to invest. Applying for multiple pre-approvals is not a good idea. Each time you apply, the lender will check your credit record. If there are multiple inquiries, this sends a red flag to the lender and may refuse your application.
Top tips: Find out if you qualify for a loan, check your credit rating, consider reducing your debt or credit card limit.
Set your goals.
What are you looking to achieve? What does success look like to you? Property investors generally invest in property to secure their financial future or to be free to do what they want, when they want it. In order for you to achieve your goals, you must first articulate what your goals are. More importantly, you need to set a deadline as to when you want to achieve these. Then you can work backwards. For example, if you’re looking to replace your income and retire on your investments within ten years, you can start by creating a 10-year plan, broken down further into 5-yearly, yearly, bi-annual all the way down to weekly timeline. This way you don’t get overwhelmed by the enormity of the task.
Understand your attitude to risk.
Your risk profile will dictate your strategy. What sort of risk can you tolerate? Getting an understanding of your own attitude to risk will help you create a strategy that reflects this. It’s not always desirable, but budgeting is the only way to ensure you’re able to balance your income and expenses.
Start budgeting.
It’s not desirable, it’s not even remotely interesting, but budgeting is the only way to ensure you’re able to balance your income and expenses. It allows you to see where you’ve been spending your money and helps you to plan for bigger expenses down the line. There’s good budgeting software available. Make you sure set this up even before you start looking for a property.
Create a purchase plan.
What does an ideal purchase plan look like? It should facilitate your goals of growing your portfolio to a point where it’s producing the growth or income you’re aiming for. It should serve as a structure for you to stay in the game.
Be informed.
Use the tools available to you to make an informed decision. Knowing the market can be key to making the right investment choice. Explore realestate.com.au/invest for some valuable insights. Being informed also means being wary of get rich quick schemes and property peddlers. If someone is promising you guaranteed returns and overnight riches, walk away; the only person getting rich is them. There’s no such thing as a property psychic and while there are tried and true methods to research, no one can make guarantees. Understanding your tolerance for risk will help you shape how much you’re willing to take on over the shorter and longer term.
Stay focused.
Make sure you stay focused. Investing in a property is a business decision, not an emotional reaction. Get clear about what you want to achieve. Set a date as to when you want to achieve this goal. Identify milestones you need to do to get your goals. It’s easy to get overwhelmed when you’re starting something new and as massive as property investing, but don’t give up. Just imagine in 10 years, if you buy the right properties this year, you could be sitting back, feeling happy, secure and even proud that you bought properties that more than doubled their values while your peers and everyone else wishes they’d bought back in the day. How good would that feel?
