At Investors Edge, we specialise in providing investors at all stages of investing with the tools they need to be successful. We love working with investors who are just starting out because nothing is more rewarding than watching an investor grow both themselves and their portfolios! Remember that even the largest investor was a beginner once.
Here are some tips for success as a first time property investor.
Treat It Like a Business: Right Now
We cannot state this strongly enough. If you have decided to become a property investor, then you must see yourself as the CEO of your own business and you must start thinking that way right now. You cannot afford to think of it any other way.
So, what do we mean by “treat it like a business”? You will have to provide yourself with the resources for success. You will need to provide direction. You will need to build a team around you to execute your plan. If you don’t have a plan right now, call someone to help you formulate one.
But before you create your plan, you must do something important.
Formulate Firm Financial Goals
One major long term financial goal for many investors is to replace their income with the passive income from property. Then they can decide how much to work and what to do with their time.
To replace a $50,000 salary per year with rental income, you would need to own $2.5 Million of property outright with no borrowing, having the rent return 5% per year. That is without taking into account taxes or fees.
So unless you win the lottery the best strategy that most investors take is to first grow a substantial asset base using high performing property, then pay down some of the debt to provide you with a passive income.
I found it helpful to set a goal for how much I would be worth by the time I turned a certain age, for me it was to create $1 Million by age 30. This focused my investing to find the fastest yet safest way to create capital growth.
Your Comfort Zone
Although you may not even realise it, you have been setting these goals from your current comfort zone and it’s bloody difficult to stretch and see beyond it.
Challenge yourself to set a goal that scares you a little but you still feel is achievable. It is also worth considering how much risk are you willing or can afford to take. As you start to take action towards these goals your comfort zone will expand and you can again revisit your goals from there.
The goals you set now are like a road map to where you want to go. It’s now up to you to fill in the blanks of how to get there, there are many routes you can take but you don’t have to do this alone.
Build a Team to Get You There
As the CEO of your own property investment firm, you are going to delegate tasks and responsibilities to a team of professionals who will help you execute your plan. The ultimate responsibility is going to rest at the top with you. You are going to provide leadership and direction. You will ultimately make the decisions, but you first need to get the input from your team of experts.
Who do you need on your team?
I started building my team when I was 16 years old and I used to annoy the crap out of people by interviewing them with a long list of questions to see how much they knew about property investing, unfortunately for most the answer was very little.
You can short circuit this process by asking other investors who they use or find a really good team member and then tap into their network. I suggest you only work with professionals that are experts in property investment and are investors themselves. In no particular order of importance you will need-
Finance Broker, Accountant, Real Estate Agent, Property Manager, Builder, Surveyor, Tradespeople
Your team will make you or break you. Choose wisely.
Research First
This is in two parts. First, you need to understand the basics of property investing so that you can choose a strategy that fits with you (see more on strategies in other posts). You need to fully understand the risks and rewards of each strategy and the key things you need to focus on to ensure success. Nothing will ever go 100% right, you can’t plan for everything. Remember that you are going to rely on your team for a lot of this information, but also remember that you are ultimately responsible for the results.
Next, you need to research your market. Know where the best areas for investment are. Know when a property is underpriced and be ready to scoop it up before another investor does. Also remember that great deals are negotiated not necessarily priced as great.
Having a savvy real estate agent will help you out greatly in this phase, but knowledge is money. Keep track of prices in your target market. Learn which areas are experiencing the best capital growth and which areas seem poised for more growth in the future.
Low Risk, Long Term Rewards
The best way to virtually eliminate risk is to purchase properties that are well located and will always be in demand to renters. You can best do this by putting yourself in the shoes of your target market.
Is the property attractive to renters? Is the street desirable? Is there plenty of infrastructure nearby?
To learn more about investing and to start putting your team together, call Investors Edge the Perth property investment experts: 1300 472 427.
