1. Work out your numbers and stick to it
It’s important to understand and work out, now more than ever, that your numbers stack up before you make your next investment. Look at all factors including the property’s performance, your portfolio’s balance sheet, as well your own liquidity and cashflow, considering
- Savings capacity
- Borrowing capacity
- Taxable income
- Value of your house
- Value of other assets
- Super balances
- Taxes you are paying
- Borrowing capacity from others
- Capital gains tax rate
- Total rents from all your investment property
These are critical factors to look so you know where you are at. Only then can you chart your destiny and look at an overall strategy for your portfolio.
2. Set a budget for the property
Be very aware that unless you are looking to make a full payment for your investment property and pay for it outright, financial institutions and lenders will generally require for you to provide a minimum deposit of between 10 per cent – 30 per cent. With the current lending rules now, banks are definitely a little more conservative with their lending and so be super vigilant about biting off more than you can chew. It is also very hard to get interest only payments on loans on investment property, so make sure you have a plan for that if you have to pay the principal and interest.
Be more mindful and careful at who you take advise and listen to when it comes to dealing with property investing. I tend to think that success precedes success
The important thing to remember is that it’s not just the purchase price you’ll need to budget for. There will be added costs such as stamp duty, legal and conveyancing fees, body corporate/ strata fees, landlord insurance, maintenance, interest on borrowings, water rates and council rates. A good rule of thumb is to multiply the price of the property by 105 per cent and that would be a good indication as to how much extra you will need to include in the purchase price.
So don’t be too hasty in putting your 10 per cent deposit unless you have done your numbers and have got some level of approval from the banks in terms of your borrowing capacity.
3. Get proper advise from well-informed circle of influence
I must admit and am still amazed at how two people can have different attitudes towards the same situation, especially when the market is seeming cooling off and just because it’s the same market, the reactions to them can be starkly different.
The one thing I find amusing is when I ask clients whom and where have they sought advise and I so often get that they have spoken with family and friends and that the generally talk reflect that the media seems to be pushing. I always think it is just so important to talk to the right people and be well informed with a circle of influence that are more experienced and certainly smarter than yourself when it comes to property investing. In fact I would even go as far as saying that it would be best if you had a great team of people to back you when you are looking at your options. Consider a great legal and conveyancing team, a great financier (ie a mortgage broker or a banker), a property manager, accountant and real estate agent that understand property investing and are property investors themselves.
Just be more mindful and careful at who you take advise and listen to when it comes to dealing with property investing. I tend to think that success precedes success, so best to get advise from people who have been successful in property investing.
What you focus on is what you think about. So yes, do you research and take all things into consideration. You are ultimately investing in the long term and property is generally a very safe investment, so bottom line, you can’t really go that far wrong when it comes to investing in property. Put it this way, if you purchased something 20 years ago, most of you would admit that you are most likely to have made double what the property was when you first bought it.
Keep an inspiring and insightful circle of influence so you are physiologically and emotional strong as you journey through your property investing.