7 QUESTIONS NEW INVESTORS SHOULD KNOW THE ANSWERS TO

May 19, 2017
Milena Juraszek

There are new investors coming on the market all the time and many will be successful. But some will fall by the wayside without achieving their goals. Many would be more successful if they asked themselves the following seven questions before getting started.  

1. What is Aim of the Exercise?

Many people want to invest but aren’t really sure what their purpose is. ‘To make money’ is probably too general an aim for most people. The answer to the question “What is my purpose in investing in property?” can depend on all sorts of factors such as how much money you have access to, how much time you have to spend tracking your investments – whether you want to make a career out of it or simply use it as a way of increasing your financial security later in life. As a property buyer, do you want to be a speculator i.e try and make as much as you can in the shortest possible time – bearing in mind the extra risk, time commitment and know how required for this strategy – for a particular short term purpose – or are you an investor i.e. in it for the long haul with the aim of achieving retirement security with minimum risk and without relying on an old age pension? Without a plan it’s too easy to get distracted by the latest investment fad or the next buzz – and find yourself failing to achieve your goal.

2. Can I Afford It?

Before you even start looking at property to buy, you need to do your sums and find out whether you have the ability to take on a loan. It’s worth having a loan pre-approved to avoid disappointment.

3. What Type of Property Should I Buy?

If your aim is security combined with low risk, you want property that will be in demand by tenants and possible future buyers who may be owner-occupiers. You want something that no matter even if you have to sell, you will realise a good price. Some properties will give good rental return but their re-sale may not bear up. Most mum and dad investors prefer median priced residential real estate. Apartments are usually more affordable than houses in the areas that experience the best demand and also cost less to maintain.  

4.What Type of Location is Best?

While there are no rules that work or don’t work without exception, in general, the highest demand is in high density population areas close to city centres, ocean, harbour or other water and amenities. Most new investors can’t afford water views or even water suburbs so what works? It has been said that if you are looking to find next buzz suburb, follow the espresso machines into suburbs young home buyers are settling in because they are the most affordable suburbs with the necessary amenities such as transport, schools and so on.  

5. Is There a Good Time to Buy?

It’s always good to buy when lots of people are selling rather than when lots of people are buying as this is when the best bargains will be achieved. Having said that, it’s best to start as soon as you can afford it as delay will usually cost more than waiting for the ideal time to buy which has no guarantee of arriving. Hindsight is usually the best way to define the state of the market! Another thing to consider is that if rents are going up, this means there is low supply of rental property in the area and your return will be good.  

6. Where Do I Go For Advice?

It is important to talk with as many people as you can. Do you have friends or family members who have rental property portfolios? They may have some good tips- but don’t take any single person’s word for anything. Seek corroboration from your accountant or financial planner for any ideas you get from non-professionals as they are the experts. You will need to consult accountants, solicitors and so on anyway for advice on how to set up the financial side of your purchase. As an investor, you may be buying in the name of your super fund or a trust rather than in your own name – a legal entity that best protects your assets and minimises your tax. You may also talk to finance brokers or banks, or a real estate agent or property strategist who understands what you are trying to achieve.  

7. Do I Have To Like The Property I Buy?

The short answer is ‘no’. It just has to fulfil the investment criteria mentioned above. Everybody ‘likes’ different things when it comes to décor. Amenities – within the property and the suburb are the most important as they are not within your power to change. 

Posted in: Property investment

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