1. Check your finances
This can be as simple as calculating expenses and deducting them with total income and assets.
This will give you an idea of how much money you have to invest.
Don’t assume right away that you can’t afford to buy an investment property. As long as you have a stable, relatively well-paid job and a fairly long history of employment, you should not have a problem getting a loan.
2. Get pre-approval
Initial consent is a formal indication to the lender that he will lend you a certain sum 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.
Although neither you nor the lender are required to make a pre-approved housing loan, it is unreasonable to apply for multiple initial approvals. Each time you apply, the lender checks your credit history. Finding multiple queries while carrying out checks signals a red flag and increases the likelihood of rejecting the application.
- Find out if you qualify for a loan
- Check your credit rating
- Consider reducing your debt or credit card limit
3. Set your goals
What are you looking to achieve? What does success look like to you?
To achieve your goals, you must first determine what they are. More importantly, you need to set deadlines yourself. This allows you to create a plan by specifying the end date to be pursued.
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.How to choose a property advisorHow to choose a property advisor
5. Start budgeting
It’s not sexy. It’s not even interesting. However, budgeting is the only way to strike a balance between revenue and expenditure. It allows you to understand how you spend money and helps you plan more expenses further.
Make sure to set this up even before you start looking for a property.
Maintaining a good understanding of the market is crucial to being a successful property investor. Picture: realestate.com.au/buy
6. Create a purchase plan
What does an ideal purchase plan look like?
This should help you reach the point where your portfolio generates target growth or revenue. And it should serve as a structure that will 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
- Get appraisal
- 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 do not give up your dreams. Tell yourself: if I buy the right properties today, in ten years I will resist with raised legs and a cocktail in my hand, celebrating the fact that I bought properties that have increased more than twice, while my peers sit cursing them decision not to follow me on the path of investment.
How good would that feel?