Property Investment Articles

[1] Buying For The Right Reasons
Property Investment is all about making money, not about owning the prettiest property in the street. While it might be comforting to know you are buying in your own city/suburb, it may not be the best use of your money. Just remember every property you buy ties up a lot of money. Make each investment count.

 

 

[2] Buying The Building, Not the Land
Another common mistake is to buy units rather than houses. Many investors go for these because they are in areas that are more affordable and more desirable. However, historically houses have a higher growth rate than units. This is because it’s the land that grows in value, not the property on top of it. Most project and property marketing companies promote units rather than houses, not because of a greater return, but because they are more available, they get better commissions and it is easier for them to sell.

 

 

[3] Buying On Personal Taste
Many first time investors go looking for the perfect property and are more concerned about the colour schemes and aesthetics rather than the area the property is in. A good investment will appeal to the broadest section of buyers and renters, not necessarily to one’s own specific tastes.  Be as neutral in your choice of colour and style as possible.

 

 

[4] Financing With The Wrong Money
How you structure your finance when investing is critical. Many home owners use their savings as a deposit. If you have a home loan, you are better off to use your savings to pay down that debt, and use the equity in your property to borrow 100% of the investment property price and costs. This is because your investment loan is tax deductible and your home loan is not. There is no point paying a cent off your investment loan while you still have non tax-deductible home loans. So your investment loan should be interest only.

 

 

[5] Tying Your Loan To Your Home
A common mistake when investing is to just go and see the bank that your home loan is with to arrange your finance. While they may lend you 100% of the purchase price & costs, they will usually cross-collaterise the investment against your home. This is an advantage to the bank and the bank only. Speak to a finance broker who knows their stuff.

 

 

[6] Lack Of Patience
Poor choices often lead many investors to sell their property after a couple of years, so they don’t achieve the results they desired. Property is a medium to long term investment and while you can achieve great returns quickly, you cannot expect your property to double in value overnight.

 

 

[7] Waiting For The Perfect Time To Invest
Many investors wait until their home loan is paid off before they invest, or wait until the media start reporting that it is a good time to invest. The media report on things that have happened, so if you wait for them, you may miss ideal buying opportunities.

 

 

[8] The Cash-Flow Downside
It’s easy to fall into the trap of poor cash-flow management as a new investor. Understanding the costs involved in acquiring and holding property can be difficult. You must be sure that you can afford to hold onto any property you buy. In other words, how much income will your investment(s) generate and will it be enough to cover your outgoings? If not, can you manage any shortfall?

 

 

[9] No Long-Term Plan
When you fail to plan you plan to fail. Itʼs an old adage but very true. Successful wealth creation through real estate requires you to set goals, determine where you want to end up, and then devising a cohesive plan to get there. You need to focus on both the short and long-term and ensure your investment decisions gel with your overall strategy.

 

 

[10] Forgetting To Review
While property investing is a long term strategy, any portfolio needs a periodic review and re-assessment. Speaking to your advisors about cash flow, tax, speeding up your five or ten year plan to take advantage of changing market conditions – these are all ways to stay ahead of the game.

 

 

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