The importance of research before investing in property
One of the biggest mistakes people make is believing that any property is a good investment opportunity. Many operate under the misconception that there will be little or no risk to their money if they invest it in bricks and mortar, but a successful investor will be the first to tell you that not just any pile of bricks will do. They’ll also tell you that you should never believe what the salesman tells you – and that’s because a sound strategy and doing your own thorough research are the keys to success when building wealth through property investment.
What should you research first?
The first thing you need as a property investor is a sound investment strategy based on your personal financial situation and your personal risk profile. To create this, you will need to research your financial position by consulting qualified professionals that you can rely on to provide you with an honest assessment and sound advice.
Engaging a team of experts at each stage of the investment journey will reduce your risk of making costly errors. When it comes to advice, it’s important to differentiate between free advice and sound, unbiased advice. Who you trust is important, so you should research every person you deal with very carefully.
As an industry accredited Mortgage Broking professional, you can rely on our advice to be sound and unbiased. We put your interests first and we will also refer you to other professionals we trust to help you along your investment journey.
People you can’t trust to give you unbiased advice are the people who have a vested interest in influencing the purchasing decision you make – vendors, sales people, property spruikers, developers, investment seminar organisers, vendor’s real estate agents and so on. These people’s only goal is to part you from your hard-earned money.
You should also be wary of advice from people who are not educated about the market or don’t understand your financial position and objectives. There’s always someone you know who has to put their .20c worth in, but you should take everything they say with a grain of salt.
Research your property markets
Once you’ve got your strategy, finances and a team of advisors sorted, the next step is to locate your first investment property. As mentioned earlier, not just any property will do. A common error is assuming that all property will enjoy capital growth – but property prices can go down as well as up, so you’ll want to research the property market you choose, before you take the next step of choosing an actual property to buy.
Smart investors know that Australia is not just one property market. For example, in this financial year, capital growth in median house prices in Sydney and Melbourne has far outstripped capital growth in all other capital cities. Remember, you don’t need to invest in property close to where you live – you can choose a property from anywhere in the country.
Research which areas have the most capital growth potential. For example, find areas where population growth and demand for housing looks set to outstrip housing supply during your planned investment period, as this will help to ensure prices go up and not down.
Research which property to buy
No two suburbs or streets are alike in any property market. The property market you choose will have pockets of property with more capital growth potential than others. You need to research your chosen area to find these pockets – they’ll be areas where public transport links are close or will be established soon. They’ll also be close to amenities such as shopping centres, business centres, parks, schools and hospitals.
Generally speaking, to support capital growth potential, you need to make sure your investment property is going to be popular with prospective tenants and will be easy to sell when the time comes for you to cash in your investment. Avoid areas where the crime rate is increasing and look for areas on the improve – those adjacent to popular or trendy suburbs are a good place to start.
Research the value of the property you choose
Once you find a likely investment property, the next thing to do is make sure you’re not paying too much for it. You can research the value of the property by getting it valued by an independent professional valuer. You can also compare the recent sale prices of similar properties in the area to do your own valuation. Once you ascertain the correct price for the property you wish to purchase, negotiate hard to get it for the lowest price you can.
Make sure your research is ongoing
Once you purchase your investment property, you’ll need to review and assess it annually to check that it is achieving the level of performance required to meet your investment strategy. That means performing tasks like researching its performance in the marketplace with regard to capital growth, and researching the rental market to make sure you are getting the maximum rental returns.
Last but not least, you’ll need to keep a constant eye on your financial position and the loan market. We can help you assess when the time is right for you to access the equity in your investment property to make your next purchase and also help you to make sure you’re accessing the best loan product for your needs.
If you need access to reliable property market data, ask us for assistance. We can also refer you to the right people to assess your tax position, legal requirements and more. Remember, the first thing you need to research is your financial position and that starts with your mortgage broker. So why not contact us to chat about your investment plans today?