6 tips for your first property investment

Looking to embark on your property investment journey but don’t know where to start? Scared to make that first leap? Today we’re taking a look at ways you can start building your portfolio.

In this article:

  • Planning your investment goals
  • Budgeting for expenses
  • Locking in your investment

Before you get started in anything it’s be a good idea to understand the type of costs or criteria required when purchasing an investment. Similar to getting a home loan as an owner-occupier, you will need to be able to demonstrate genuine savings, a deposit (or equity from your own home/a guarantor) and a good credit rating. 

1. Spend some time learning about property investment

With so many learning opportunities available when it comes to investing, you can find a range of property invested resources suitable to your learning style. These can range from:

  • Books, audiobooks
  • Podcasts, YouTube videos, 
  • Seminars, webinars, etc.
  • Finance professionals

Many of these resources are produced by successful investors themselves meaning that you’ll be able to get insight into the things you should and shouldn’t do, and how to avoid the same investing pitfalls they might have come across.

2. Write out your goals 

If you’ve done your research, you’ll know that there are numerous strategies when it comes to investing. However, depending on your personal finance and investing goals, the way you approach purchasing an investment property will differ. Ask yourself what you’re investing for:

  • Long term capital growth?
  • As leverage?
  • Income?
  • For a tax deduction?

This question is important because the type of return you are looking for or the portfolio you plan to build will change the types of properties you purchase, how long you hold the property for and what you do with it. For example, if you’re looking for a quick return during a boom in the property market, one way to earn money fast would be to buy an older property in the right area, renovate it and then sell it for a profit. 

3. Get your finances (and relevant documents) together!

So now you know what you want but how do you make sure that option is even financially feasible for you? Easy: start keeping track of how much you earn, your usual expenses and whether or not you can budget further. This will help you not only figure out how much money you have to put towards an investment but can also help in the lead up to applying for a loan. 

By reassessing what is a necessity (do you really need that double shot, almond, caramel latte every morning?), and avoiding unnecessary spending you’ll be able to grow your savings in no time. By growing your savings, preparing a cleaner transaction history, and making sure you have payslips and statements on hand already, you’ll find the borrowing process to be a lot more smoother and faster. 

4. Budget for investment expenses

By now you should have a clearer understanding of your budget and what you can afford. You might have even received pre-approval and have begun searching for your favourite property, however there are some other costs associated with purchasing an investment. These can include:

  • Adding extra on top of your rental income
  • Strata and Council rates
  • Maintenance and repair cost
  • Wear and tear costs 
  • Property Management costs (if you live far away from the property or would like someone else to manage it). 
  • Vacancy costs (if there is no tenant renting your house).

If you haven’t done this yet, make sure you consider the extra costs involved with investing and make sure you have enough spare cash to alleviate any concerns that might arise.

5. Find an investment

Finding an investment is the most crucial step in investing because the type of property you buy can greatly affect your return. If you have done all of your research, know your finances back to front and have received a pre-approval, it’s time for the grand finale… finding an investment! But before you sign any contracts make sure you research into your desired investments:

  • Location: Is it in a growth suburb? Has it grown in rental demand?
  • Historical Performance: How much growth has the property previously had?
  • Infrastructure: Is the property close by to schools, public transport, shopping centres, hospitals, etc.
  • Condition: What condition is the property in? Will you need to replace things?
  • Potential: Can I add anything to this property that will increase desirability or profit?

6. Give it a boost

If you’ve locked in your property deal it’s time to hone in on that last dot point above: potential. If you’ve researched right, maybe you’ve found a property on a decently sized piece of land, maybe you’ve realised that if you put a little TLC into the backyard, you could increase the property’s value, selling price and rental price. 

Whatever potential you saw, now is the time to build on it. This can include renovating, subdividing, developing, adding a granny flat etc. However, as a first-time investor do make sure you follow your council’s property guidelines, seek development or council approvals, zoning requirements and the like. If you’re ever unsure do speak to others beforehand, get in touch with people who have experience in utilising the type of value add you plan on implementing and do your research.

Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.