There are a number of steps you should take before committing to a property investment.

8 steps to get you started in property investment

Are you unsure about how to get your foot in the door when it comes to investing in property?

You’ve been reading the books, magazines and property agent reports . You’ve been watching the various news headlines. You’ve been browsing through properties from the comfort of your couch. Yet when it comes down to it, you are stopped at the last hurdle, leaving you prone to tearing your hair out.

At the very least, you can rest assured that there have been plenty before you in the same position. In fact, figures from the Australian Bureau of Statistics show that the monthly value of lending to investors has remained near record levels throughout 2015, amounting to more than $13.67 billion in August.

The monthly value of lending to investors has remained near record levels throughout 2015

This number is substantial on its own, but when you compare it to the same time in 2011 where it sat around $6.5 billion, it’s gigantic!

It’s likely that your apprehension is providing the final barrier to joining the burgeoning investment loan market, and often it is one of the hardest to overcome. A lot of people can find themselves overwhelmed by the entire process of property investment, thinking they are ill-qualified and giving up before they even begin.

However, it doesn’t need to be this way. When it’s all boiled down, investing in property is relatively straightforward – the Australian Securities and Investments Commission (ASIC) affirms it is one of the easiest methods of investment to understand.

Here are a few steps to help you get started on your property investment adventure, while keeping your hair intact.

Investing in property is much easier when split into steps.Investing in property is much easier when split into steps.

1. Get your finances sorted

You won’t get very far in your dreams of property investment without first paying some particular care to your finances, because you can bet your house on it that your lender will be going through them with a fine-tooth comb.

Essentially, all you need to do is create a list of all your assets (including any incomes), your debts and expenses. This will provide you with a ballpark figure of your borrowing power and give you an idea of what you are able to afford in the market.

You should also request your credit report to ensure there are no blemishes that could raise red flags when it comes to seeing your lender – even simple aspects like late payments on your utility bills can be added to your report. According to the Office of the Australian Information Commissioner, you can order a copy of your credit history once a year at no cost to you.

If you would like to know more, a competent buyers’ agent will be able to take a look at your financial standing and offer advice.

2. Get a budget going

Did you sort through your finances and realise you don’t have enough equity to purchase your desired investment property? Even if you do, there’s a lot of costs behind the price tag, which is why it’s a good idea to have some funds put aside for unforeseen circumstances. The Australian Taxation Office states that some of the costs aside from the purchase price can include:

  • Vacant periods
  • Council rates
  • Maintenance and repairs
  • Stamp duty
  • Insurance
  • Legal expenses
  • Loan fees

Having a budget in place even before you start looking for property is also likely to please your lender, as it will show you have regular saving habits.

Putting a budget in place can significantly help your financial standing.Putting a budget in place can significantly help your financial standing.

3. Get pre-approved

When it comes to the world of property investment, there are a number of options that can give you an edge, including the services of a property buyers’ agent and pre-approved investment loans.

Approaching the market with a pre-approved home loan can make a world of difference, as it’s more than a ballpark figure – you will be aware of your exact limit, helping you to avoid over-committing when it comes time to purchase your home.

This will allow you to act with more certainty, in addition to saving time when it comes to the search, as you can discard all properties that are out of your reach.

However, going back to your credit report, it’s vital that you don’t apply for finance from a number of lenders. According to Veda, every time you make an application, a record is added to your report. Credit providers are likely to take a negative view of a report that has a lot of enquiries in a short time period, as it suggests you’ve been denied numerous times.

4. Set goals

What is it that you want to achieve? Where do you want to be in 10 years time? Whether it’s a comfortable retirement, to make the money to go travelling or even just the freedom to do what you want and when you want (property investment managers are handy here), you should establish targets with deadlines and stick to them.

Setting goals can help to keep your main objectives in focus, breaking down the task at hand and making it seem more achievable.

Having a pre-approved loan can help your confidence.Having a pre-approved loan can help your confidence.

5. How much risk can you tolerate?

While property investment is considered to be one of the safer forms of money-making ventures, it is still not without risk. The ASIC used the example of Gold Coast apartment units, which had been supplying investors with ludicrous profits up until February 2008 where the values plummeted by 17.9 per cent over the years to March 2013.

You can avoid situations like this by acting off insights from experts like buyers’ agents, as deciphering the property market trends is their full-time job. Understanding your attitude to risk will help you and your property agent to formulate a suitable strategy moving forward.

6. Do your due diligence

This includes both hitting the books and the pavement. Finding an area that can potentially provide you with substantial capital gains down the line or a significant rental yield in the now takes a proper understanding of the market.

There is a plethora of information you can access online, the only problems you have is firstly finding it, and secondly ensuring that it is authentic without bias. The ASIC affirms market indicators that can be of great use, including recent and current sales, median prices of areas and how they’ve changed over the years, vacancy rates, council plans and reports from authoritative figures.

Once you’ve found an area where the numbers all match up, you should go and view the area for yourself. This will enable you to determine the proximity to shops, public transport and schools, among other things. You can also attend a few open homes to get an idea of the properties available in the area, not to mention the kinds of people that inhabit them.

Getting out and seeing the property in the flesh can tell you much more than numbers.Getting out and seeing the property in the flesh can tell you much more than numbers.

7. Make sure it is a business decision

When purchasing property, it is very easy to be influenced  by your heart rather than your head. It’s important that you remember the property is not for you to live in, it is for your financial wellbeing!

Emotion should not be a part of your final decision, only the numbers, the property’s condition and potential for it to be profitable. Having a third party on hand like a buyers’ agent can help to ensure that your heart is taken out of the equation, allowing for an informed decision.

8. Use a buyers’ agent

It’s not uncommon to find yourself firmly stuck in the realms of uncertainty when it comes to property investment. Fortunately, a buyers’ agent can guide you forward and help to navigate the often intimidating property market for you. They can determine what it is you’re after, where you stand financially and even provide access to exclusive private house sales.

If the various responsibilities associated with renting a property is causing concern, property investment managers can take care of the entire process for you, from marketing your property to acting on your behalf as the landlord.

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