Episode 299: How to Know If You're Ready to Buy an Investment Property

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You do not need perfect market conditions or complete certainty before investing in property. But you do need a few key things in place first.

In this episode, Jarrad Mahon reveals how to know if you're truly ready to buy an investment property.

And what actually makes an investor ready might surprise you, because it has little to do with doing more research, waiting longer, or what the market is doing.

Whether you're buying your first investment property, planning your next purchase, or growing a property portfolio, this episode shows you where you stand - and exactly what to do before your next move.

In this episode, you'll discover:

✅The real reason so many smart investors stay stuck for years

✅Why being "ready" to invest has nothing to do with certainty

✅The moment when property research stops helping you and starts hurting you

✅One question to answer before even thinking about suburbs or properties

✅Important! Avoid this borrowing mistake that locks investors out of their next purchase for years

✅Why a property that's perfect for one investor can be wrong for you

✅The simple test every property must pass before it ever earns a place in your plan

Let’s go inside 👇🎙️

Episode Highlights:

1. 00:00:00 Intro
2. 00:03:56 Strategy clarity
3. 00:07:00 Financial readiness explained
4. 00:10:20 Which compromises matter
5. 00:13:26 The biggest readiness test
6. 00:16:40 Readiness scorecard

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Our Services:

✅Get your Strategic Portfolio Plan and our help with Buying Your Next Perth Property  (https://www.investorsedge.com.au/invest-in-perth-property/)

✅Get clear on your current property’s outlook and the best strategy for you? Email Jarrad for your Strategic Property Review: jarrad@investorsedge.com.au 

✅For More on our Investment Buyers Agency to buy High Performing property: https://www.investorsedge.com.au/invest-in-perth-property/

✅For more on our Home Buying Service to a hassle free purchase and move: https://www.investorsedge.com.au/home-buying/

✅For more info on our award-winning and highly rated Property Management services that give you guaranteed peace of mind https://www.investorsedge.com.au/perth-property-management-specialists/

✅For more info on how our Property Sales services can ensure you get the best selling price while handling all the stress for you https://www.investorsedge.com.au/selling-your-perth-property/

Tools & Insights:

✅Take our Property Investor Readiness Scorecard to uncover your blind spots and make smarter investment decisions before you buy: https://investorsedge.scoreapp.com/

✅Get your Rental Health Score now to ensure your Perth rental property is optimised for returns and sleeping well at night: https://rentalhealth.scoreapp.com/ 

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Episode Transcript

[00:00:00] There are two very different types of property investors I come across. The first has been thinking about investing for years. They listen to every podcast, including mine, I hope, read every article, watch the market, analyze suburbs, worry about interest rates, wait for the government announcement, and keep telling themselves, "I'll buy when I feel a little more confident."
And somehow, three years later, they still haven't bought. And I come across lots of these people at networking functions, and, uh, they might go as far as to speaking to us about doing something, but then years pass b- and they still haven't done anything. And then I've got the opposite investor. They see a property that they like, someone tells them the suburb's gonna boom, and the numbers look roughly okay, and they jump in without really understanding how that purchase fits into a bigger [00:01:00] strategy.
So neither of those approaches is what I'd call being truly ready to invest. So today, I wanna talk about what actually makes someone ready to succeed with property investment in the most optimum way. And importantly, this is not gonna be a whole list of reasons why you should wait. Quite the opposite. I believe one of the greatest risks investors face is procrastination.
In the second case, at least that investor had taken action, and if, if you'd done that four, five years ago, you'd probably be sitting on double the equity now. So procrastination's definitely the greatest risk. And I wouldn't go waiting for perfect conditions or waiting for complete certainty or waiting until every economic indicator turns green, because that moment almost never comes.
And readiness, I think, is more about really [00:02:00] becoming intentional enough that you can make better decisions and then have the confidence to act on them. And towards the end of today's episode, I'll explain how this thinking ties into our Property Investor Readiness Scorecard and the broader Investor's Edge method that we have.
So Readiness doesn't actually mean perfect. Let's deal with this first. You don't need to have everything figured out before you invest you don't need to know exactly what interest rates will do you don't need to know precisely where the market will be in 12 months. It's hard to tell exactly at the moment and you don't need to understand every tax rule, every suburb, or every investment strategy that's out there, and you certainly don't need the perfect property because perfect doesn't actually exist.
Property investing always involves uncertainty. The market changes, governments change their [00:03:00] policies as we've seen, your income changes, families grow, careers change, interest rates move, and unexpected things can happen. The objective isn't to remove uncertainty. The objective is to build a strong enough framework around your decisions that you can make sensible choices despite that uncertainty, and that's a big difference between being cautious and being stuck And I see investors sometimes mistake more information for more certainty and they think if I just research another suburb, if I listen to another 10 podcasts, or if I wait for the next interest rate decision, then I'll finally know what to do.
But eventually, more research actually stops improving the decision. It just delays it. And at some point you've got to move from research into decision-making. So I think readiness actually starts [00:04:00] with knowing where you're going. So the first element of investment readiness is strategy clarity. So before asking what suburb should I buy in, or, you know, what property should I buy, I think there's a much more important question, and that is, what are you actually trying to achieve?
Because property itself isn't the goal. Usually the goal is something behind the property. Perhaps you want a greater financial security. Maybe you wanna retire earlier or have the choice to. Maybe you want an additional income stream in retirement. Perhaps you wanna help your kids financially. And a great episode last week on, on ways we can impart that knowledge, so check that out.
And maybe you want choices later in life. Property is simply the vehicle, so before deciding what to buy, you need some clarity around that destination. Things like what does financial [00:05:00] freedom actually look like for you? How much passive income would make a meaningful difference? When would you ideally like to achieve it?
And how much risk are you willing to accept? And how much cash flow can you comfortably contribute along the way until your investments start paying you back? And what does that next property need to contribute towards the bigger picture? Because without that context, I don't really believe there is such a thing as a universally good investment property.
There are properties that fit your strategy and there are properties that don't. And a property producing a high rental yield might be perfect for one investor, but another investor might need stronger capital growth, and someone else might need to preserve their borrowing capacity because things are tighter and it's gonna limit what they can, um, actually control as an overall asset base.
Another investor may benefit from subdivision or development potential and have the extra time to see those things through and [00:06:00] wanna be a bit more active with their investing. So someone nearing retirement, likewise, probably shouldn't necessarily be following the exact same strategy as a 32-year-old professional with strong income and decades ahead of them with time for things to compound.
So one of the key ideas behind the Investor's Edge method is very simple. We don't start with the property, we start with the investor. And once we understand where someone wants to go, we can start working backwards. Now, can you buy it, hold it, and keep going? So the next area is financial readiness. And there's another question that gets asked all the time that I think can send people down the wrong path.
How much can I borrow? That's important, but I don't think it's the most important question. A better question is, how much should I borrow based on the strategy I'm trying to execute? And perhaps even more importantly, what [00:07:00] happens after this purchase? Because property wealth is generally created through a sequence of good decisions, not one enormous purchase.
So if buying one property completely exhausts your borrowing capacity, empties your cash buffers, and leaves you financially stretched every month, that might not make your next move possible for a long time, or it could make it very difficult. So when I'm thinking about financial readiness, I'm considering things like your borrowing capacity, your available equity, your deposit, purchase costs, cash flow after the purchase, your emergency buffers that you have, your ability to absorb interest rate changes, and importantly, how the purchase affects your ability to invest again and how soon that can be.
Because borrowing capacity is a limit, it's not a strategy. And sometimes deliberately buying below your maximum capacity can create considerably more flexibility later. And that's something [00:08:00] we've been seeing quite clearly when preparing strategic portfolio plans lately. The biggest or most expensive property somebody can afford is not automatically the property that puts them in the strongest long-term financial position.
So you need to think several moves ahead and look at the, um, second and third order consequences of the purchase in front of you. And this all comes down to, I think, you need a way of making decisions. So the third area is your decision-making framework. And this is where property investing- investment can become incredibly overwhelming because there is an enormous amount of information available.
You've got population growth, infrastructure spending, you've got vacancy rates, rental yields, school catchments, zoning, development potential, employment centers, interest rates, government policy. Then you've got demographics for an area, dwelling supply for an area. You've got your building approvals of what's coming, [00:09:00] comparable sales to, you know, guide you on your pricing.
You've got the property's condition, the street appeal, land content, strata costs. The list goes on and on, and sorry to hurt your head with that. And if you don't have a structured framework for deciding what actually matters, every new piece of information can change your direction and potentially give you a reason to rule the, the property out.
So one week you're chasing high yields, the next week somebody tells you land is everything, and then someone says units are about to outperform. Um, and then somebody tells you that, you know, only to buy houses, stay away from units. So someone else could tell you that Perth has peaked and you should wait.
Suddenly, you're paralyzed 'cause you're getting told all these different things. A good framework does the opposite. It simplifies the decisions. It allows you to say, "This is what I'm trying to achieve. This is the type of asset that fits that goal. These are the things that matter most, and these are [00:10:00] the things I'm prepared to compromise on," because every property will involve compromise.
Maybe you get the perfect suburb, but the house needs work. Maybe you get the perfect property, but the yield isn't quite as strong. Maybe you get an excellent yield, but give up some growth potential. Being ready means understanding which compromises matter and which ones don't. So within our buying process, we're always thinking broadly about three levels.
Is the broader suburb or location appropriate? Is the pocket or immediate location around the, the property there appropriate? And is the individual property appropriate? But ultimately, everything has come back to the one question: Does this property perform the role we've identified for it within the broader strategy?
And that review that we do, by the way, is called our trifecta criteria. You would've heard me mention it many times. It's where we look at the [00:11:00] suburb, the pocket, and the property, and make sure that it stacks up at all levels over the short, medium, and long term. Now, r-readiness also means having the right team.
So the next piece is something investors sometimes underestimate until they've made a few mistakes or gone down, uh, working with the wrong person only to discover how much of time it's cost them or how much, um, effort, hassle, and, uh, money potentially by making the wrong decisions. So the next piece is something investors do underestimate sometimes, the quality of your team around you, because property investment is rarely an individual sport.
Depending on your strategy, you might need a mortgage broker, accountant, buyer's agent, settlement agent, property manager, building inspector, financial advisor, development consultant, and various trades. But simply having a collection of professionals doesn't necessarily create a good team, because sometimes everyone is solving a different problem.
[00:12:00] The broker is trying to maximize what you can borrow. The buyer's agent is trying to find you a property. The accountant is focused on tax. The property manager's focused on the tenancy. And each piece might make sense in isolation, but nobody's asking, "How does it all fit together?" And that's why I think strategy needs to sit above the individual transaction.
Your broker should understand where you're trying to go. Your buyer's agent should understand what role the next property needs to perform. Your property manager should understand that maximizing the long-term performance of the asset matters, and somebody needs to maintain visibility over the bigger picture, and that's another important component of the Investors Edge method.
We don't see the purchase as the finish line. The property has to be bought well, then managed well, then reviewed, and then optimized, and eventually, you may need to decide whether that property [00:13:00] should still be held at all, because buy and hold forever isn't automatically a strategy either. And sometimes the property that was right for you 10 years ago isn't the property you need for the next 10 years.
Go back and listen to our strategic property review episode two episodes back where we spoke about, you know, does it-- would you buy this property again today? Now, the biggest readiness test is will you act? Now, we get to what I think may be the most important element, execution. You could have the perfect plan, an excellent income, a strong borrowing position, plenty of equity, an incredible team all lined up ready to go.
You could understand every market statistic, but if you never act, none of it creates wealth. And this is where mindset becomes incredibly important You need to accept that you'll never have perfect information. You need to accept that every investment involves risk, and you need enough confidence [00:14:00] in your strategy and your process that when a suitable opportunity presents itself, you can make a decision.
And that doesn't mean being reckless. It doesn't mean rushing. It doesn't mean blindly trusting somebody else. It means developing a process that you trust and then following it. And one of the beliefs I have around both business and investing is that confidence often doesn't come before action. It comes from action.
So you make a decision, you learn, you review, you improve, and then the next decision becomes easier. And that's why I don't want our readiness framework to ever become, "Here's why you're not ready." I want it to be, "Here's the next thing we need to solve so you can move forward." And that's a very different mentality to take to this.
Now, let's take a look at the Investor's Edge method because when I step back and look at all of this, it really ties into what we call the [00:15:00] Investor's Edge method. My belief is that lasting wealth isn't only built by buying the right properties. It's built through having the right mindset, strategy Team and taking consistent action towards your goals.
And you need the mindset to make decisions and continue progressing. You need the strategy wrapped around it all so you know where you're going. You need the right professionals around you. You need an acquisition process that ensures property that you're buying fits the strategy, and then the property needs to be managed properly, and your portfolio needs to be continually reviewed and optimized because investing isn't buy, hold, hope.
It's plan, buy intentionally, manage deliberately, review regularly, and optimize, and then repeat the process as your circumstances evolve. And that creates a completely different type of investor. Instead of continually reacting to the [00:16:00] market, they're making decisions based on their own plan. So what is the property investor readiness scorecard?
That's what led us to create this, and I'm deliberately not gonna take you through every question today because firstly, that would make a fairly boring podcast, and secondly, the value comes from actually sitting down and answering the questions honestly. The scorecard looks at the different areas that contribute towards being ready to invest successfully.
It helps identify where you're already strong, where there may be gaps, where you might have blind spots, and most importantly, what should you focus on next? And I wanna reinforce this one more time. This isn't a scorecard designed to tell you to wait. It isn't about creating another 12 hurdles before you're allowed to buy a property.
You might discover you're already much more ready than you thought, or you might discover there are one or two things that you need tightening up. Maybe the strategy isn't clear. Maybe the finance needs [00:17:00] reviewing. Maybe your buying criteria aren't clearly defined. Maybe you need a better team around you.
Great. We can solve those issues, and we can help you do it, or you can try to go about it yourself and keep moving. Keep moving forward with, uh, making this happen. So if there's one thing I want you to take away from today's episode is this: being ready doesn't mean having certainty. Being ready means having enough clarity, enough preparation, and a strong enough decision-making framework that you can move forward despite uncertainty Because there's always gonna be another reason to wait.
Another interest rate decision, another government announcement, another property forecast, another opinion. You can find them anywhere. At some point, wealth creation requires action. But the goal isn't simply to take more action, it's to take better, more intentional action. So if you're currently thinking about your next investment and you're wondering, "Am I actually ready?"
Take our property investor readiness scorecard. Uh, there'll be a link in the show [00:18:00] notes. It'll help you understand where you're currently sitting, and more importantly, what your next step should be. Because at Investors Edge, our goal isn't simply to help people own more property, it's to help people make better property decisions and intentionally build lasting wealth.
Thanks for tuning in, and catch you on the next one.