We hear various opinions and news snippets every day about the pitfalls of buying an investment property in Brisbane but rarely are we informed about the many benefits or stories of wealth created from property investment. So, it’s no wonder that less than 2.3 million Australians own an investment property. They struggle to wade through all of that noise pollution, so much so that they get scared to death ofrepeating the mistakes that are so broadly bandied around the media.
Honestly, it’s no wonder that the majority of Australians can’t get past their own front door when they think about property investing. The ATO stats show that out of these approximately 2.3 million investors, less than 30% own more than one investment property and 50% of those will sell their investment property within the first five years of ownership without really being rewarded with the benefits of property investing.
In all my 13 years as a buyers agent and property Investment strategist, I’ve never met a property investor who wants to create wealth through property by purchasing a single solitary investment property. So, my thinking is that they all jumped into buying an investment property with their eyes wide shut and were not prepared for the unexpected.
With that in mind, I thought I’d try to help by listing some of the key things that I believe are crucial to property investors when thinking of becoming a property investor, when they’re ready to buy and what investment type suits their needs.
1. Invest in Yourself
Take time out to educate yourself a little about buying an investment property. Attend seminars, read books and do your research. Knowledge is power but always know when to stop. Don’t get “analysis paralysis”.
2. Work with a Finance Broker
Make time to sit with a finance broker to get an idea of your borrowing capacity and then determine what your comfort level is. Choose a figure that is a maximum for your purchase, one that you can afford to pay the loan interest on for two months at least in times of prolonged vacancy and NIL income.
3. Build a Buffer
Have a financial buffer in place such as an offset account, to assist you with the months that you may need to chip in some funds to support the investment.
4. Use an Accountant
Make time to sit with an accountant who’s well versed in property ownership structures. This is important for a number of reasons including maximising the tax benefits and asset protection. It’s also beneficial in mitigating the land tax implications of each state.
5. Decide on the Type of Property Investment
Armed with information from steps #2 and #4, decide on which type of property investment it is that you’re after, such as capital growth vs cash flow and evaluate each. For me, it’s all about Capital Growth but there’s undoubtedly a need for a balance in any portfolio.
6. Choose a Property Investment Strategy
Decide on what type of investment strategy suits your risk profile and goals and then what type of property will help you achieve those goals. Do you prefer a ‘set and forget’ strategy, relying on the organic growth and rental income or do you want something that you can manipulate the growth and the value through renovation or development?
7. Arrange Pre-Approval Before Buying an Investment Property
Get your broker to arrange for pre-approval for the purchase from your lender and make certain that both the property ownership structure and the loan for purchase are in sync with each other.
8. Interview and Engage with a Local Property Buyer’s Agent in Brisbane
Sit with an experienced and independent buyer’s agent in Brisbane. I also would suggest that “experience” should correlate to at least 10 years in the industry. This way, it’s acceptable to assume that they have knowledge of recent property cycles in their areas.
Don’t be fooled into buying into an area or state in which the buyer’s agent does not operate daily. They’re not just “order takers”. The reasons for this are many but the most important factor is “local market knowledge” and that they can tell you that they have walked through the property and the street itself.
You see, not all areas are created equal—it is all good being told that “this data shows that this area is on the rise” and “this area is pegged for massive future growth”. But truth be told all areas have best performing “pockets” and streets in these pockets perform better than others. I would also suggest that the buyer`s agent is also a qualified property investment adviser (QPIA). This means they’ll better understand investment strategies and they can make sure that you have the best plan for you in place and can advise correctly about the variables in each property and how they will help you reach your investment goals.
9. Do Not Follow the Herd
If you buy where the majority of investors buy, you’ll get what they get – increased competition for tenants and more volatile house pricing. It’s a fact that 67% of property transactions in Australia are accredited to owner-occupiers. So why put your money in a pot that is accountable for only 33% of the wealth in property?
Follow the wealth and your property will grow in value, always remain stable (even in a slow market) and will always attract a sustainable rental income. Importantly, it also has a greater chance of obtaining a higher value on sale than purchase if the need arises for a quick sale.
10. Buy the Right Property, In the Right Area, At the Right Price and Review Performance
We all know that you make the money in real estate when you buy, not when you sell. So, again, to highlight the importance of step #7, a local buyer’s agent expert on your side will set the negotiating range for the property and use their best endeavours to secure it under this figure.
Then, assuming that it is located in a sustainable growth area and you have secured the service of a skilled asset/property manager, all you need to do is wait for 12 months (sometimes less) and have your investment strategist review the value to determine its performance and your potential ability to buy again.
I know how all of this or even a few steps in this process can appear to be a little “too hard” but that’s fine. If it was easy then everyone would be a property investor. What I’m happy to tell you is that I can assist you with all of the introductions to the professional alliances that you will need to make sure that you are building the right foundation on which to start buying an investment property in Brisbane. Then, I can also assist with probably the most important part of the journey, the property selection and purchase.