Property investing is still the best way for the average Australian to amass wealth, but it isn’t guaranteed by any means. Throwing money at the wall and seeing what sticks doesn’t work. Here are five rules to become a smarter property investor.
Research Always Trumps Speculation
Speculators buy and prey; investors do their due diligence. The process is simple: use your research to find an underpriced property in an area primed for long-term capital growth. Make sure you buy a property that suits what prospective tenants in the area are wanting.
Buy Properties that are Always in Demand
Buying properties for niche markets such as student housing or studio apartments can be a recipe for disaster. You always want to buy properties that are going to be in high demand, that way when it is time to sell you can maximise your price. Properties priced around the median price for a suburb, certainly not at the top end of a suburbs prices. The top end is always first to feel the pinch when the market starts to cool.
Capital Growth First
We are big fans of cash flow and tax advantages. We encourage investors to take advantage of both. But you must remember that investing is still a game of producing capital growth to grow your portfolio and ensure your future. If you get too caught up in cash flow and tax schemes, it can distract you from the real prize: a world class investment portfolio. That said I strongly suggest that you keep any shortfalls to a manageable level and have a plan for going positive cashflow in the first 1-3 years.
It is the land underneath the property that determines your level of growth over time. This is especially true in the inner and middle ring suburbs. There is a lot more land available in the outer ring suburbs; this creates low demand, which is great for first-home buyers. But significant capital growth comes from the inner and middle rings.
It is scarcity that creates demand and raises prices. As Australia’s population continues to grow, locations that are closest to the infrastructure of capital cities will rise even higher in price. Those who get in now will be in great shape down the road.
Surround Yourself with a Professional Team
Don’t think you can go it alone; it usually won’t work. Develop a team including an agent, a property management firm and all of the other professionals it takes to succeed.
Call 1300 472 427.