1. Check your finances
This can be as simple as calculating your expenses and offsetting them against your total income and assets.
This will give you an idea of how much money you have to invest.
Don’t immediately assume you can’t afford to buy an investment property. As long as you have a stable, reasonably well-paying job and have a fairly long history of employment, you shouldn’t have a problem getting a loan.
2. Get pre-approval
Pre-approval is formal indication from a lender that they will lend you a certain amount of money.
You can get pre-approval directly from your lender or through a trusted mortgage broker. Going through a broker before applying for pre-approval is a good idea if you’re unsure you can afford to invest.
While neither you nor the lender is obliged to follow through with the pre-approved home loan, applying for multiple pre-approvals is unwise. Each time you apply, the lender checks your credit record. Finding multiple inquiries when they conduct their checks signals a red flag and increases the likelihood that they will refuse your application.
3. Set your goals
What are you looking to achieve? What does success look like to you?
In order to achieve your goals, you must first articulate what they are. More importantly, you need to set yourself deadlines. This allows you to create a plan, by providing an end date to aim towards.
For example, if you’re looking to replace your income and retire on your investments within 10 years, start by creating a 10-year plan. Then break down your long-term goal into weekly, monthly and yearly goals.
Not only does this provide you with a clear plan of action, it makes your goals more manageable, preventing you from being overwhelmed by the enormity of the task.
4. Understand your attitude to risk
What sort of risk can you tolerate?
Your attitude to risk should inform your strategy.
5. Start budgeting
Budgeting is the only way to ensure you’re able to balance your income and expenses. It allows you to understand how you spend your money and helps you to plan for bigger expenses down the line.
Make sure to set this up even before you start looking for a property.
6. Create a purchase plan
What does an ideal purchase plan look like?
It should help you reach a point where your portfolio’s producing your target growth or income. And it should serve as a structure to help you stay in the game.
Here’s an example of a purchase plan you can follow:
-Define your strategy
-Set up your criteria
-Do your research
-Choose a property from your shortlist
-Do your due diligence
-Make an offer and negotiate
7. Be informed
Use the tools available to make an informed decision and keep abreast of property market trends; understanding the market will be crucial to making the right investment choice.
Being informed also means steering clear of get-rich-quick schemes and property peddlers. If someone is promising you guaranteed returns and overnight riches, walk away; the only person getting rich is them.
There’s no such thing as a property psychic, and while there are tried and tested research methods, no one can make guarantees.
8. Stay focused
Property investment should be driven by the numbers, not emotions. Make sure you stay focused on your end goal by:
painting a clear picture of what you want to achieve,
setting deadlines for your goals,
breaking down your long-term goal into short-term goals
It’s easy to get overwhelmed when you’re venturing into something as fraught as property investment.
But don’t give up on your dreams. Tell yourself: if I buy the right properties today, in ten years I’ll be leaning back with my feet up and a cocktail in hand, celebrating the fact that I bought properties that more than doubled in value, while my peers sit around cursing their decision not to follow me down the road of investment.
How good would that feel?
Article from realestate.com.au