Admit it, you’ve been thinking about investing in property. You’ve read the books, magazine articles and reports. And you’ve been religiously checking realestate.com.au for properties. But when push comes to shove, you never follow through. Don’t worry, you’re not alone. In fact, despite real estate being a national pastime, only 8.4% of Australians, or roughly 2.1 million people, owned an investment property, according to the Australian Tax Office. But the reality is property investing isn’t as difficult as it’s made out to be. And so, here are eight steps to invest in your first property.
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.
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.
Find out if you qualify for a loan
Check your credit rating
Consider reducing your debt or credit card limit
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.
It’s not sexy. It’s not even remotely interesting. But 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. With great budgeting tools such as this planner and this spreadsheet tool, there really is no reason for you not to set up a budget. Make sure to set this up even before you start looking for a property.
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?
AS SEEN ON REALESTATE.COM.AU