Getting started investing in property can be difficult. The first step when you go to invest is always the hardest. You won’t have as much money or knowledge or experience as a seasoned investor. So how can you start investing in property when you haven’t done it before?
Tip#1: Set financial goals
Tip number one is to set financial goals. A lot of new investors make the mistake of going into the property market with no idea what they want to buy or what their investment goals are.
It’s very important to understand where you want to go financially so that you can choose the most suitable properties.
Property is a vehicle to get you to where you want to be financially. If you purchase the wrong vehicle you could start heading in the wrong direction.
People who want to be financially free often buy negatively geared properties that take money out of their pocket. So it’s very important to set your financial goals early and to understand exactly what you want to achieve.
Your goal could be anything. You might want to generate passive income or get capital growth or invest in a certain way. The main question you want to ask yourself is “Will this property help me achieve my goal?”
Tip#2: Start saving your deposit
We always underestimate how long and how difficult it is going to be to save our deposit. The sooner that you start saving then the sooner you will be able to buy an investment property.
The important thing is to set a savings target. From here you can pay yourself first and work out how to live off the remaining money.
Tip#3: Learn about investing in property
Start learning about investing in property.
I became very interested in property when I read Steve McKnight’s book From 0 to 130 Properties in 3.5. Years at the age of sixteen. This book pushed me into learning more about investing in property because I saw that there was an investment strategy that could work for someone who didn’t have a high income.
So read books like Steve McKnight’s 0-130 properties in 3.5 years and other top investment property books. Read blogs like this one. Buy magazines like Australian Property Investor or Your Investment Property and start learning more about investing in property.
Learn about depreciation and financing and taxation and all of these different things because there is so much you need to know.
People who go in blind are bound to make mistakes and take too many risks. The more you know, the better you can invest.
Tip#4: Consider cheaper properties
Some people who live in capital cities feel trapped because they can’t afford to invest in the property market where they live. This is understandable. Not everyone can afford to pay $800,000 or $1,000,000 on a two- or three-bedroom property.
Capital cities can be very expensive. But the property prices become much more reasonable outside of capital cities.
Don’t rule yourself out of investing in property just because you can’t afford a property in the suburb you want to live. Look outside of your area for places that have great growth potential and good factors for real estate investing.
Remember the Two Hour Rule. Go two hours from where you live and you’re highly likely to find something within your price range.
Let’s look at Sydney as an example. Two hours north is the Central Coast with three-bedroom houses for approximately $300,000. Three hours south is Nowra with three-bedroom houses for $300,000 to $400,000. And two hours west are areas like Lithgow where you can again buy cheap property.
So use the Two Hour Rule to find properties outside of your area that you may be able to afford and get into the market earlier. But of course ensure that it is going to be a good investment and a good area to invest in. You don’t want to lose your money.
Tip#5: Look as if you’re ready to buy
My final tip is to look at the property market as if you’re ready to buy. This is something that I used to do as a teenager. I wasn’t yet old enough to invest in property but I would look as if I was going to buy.
Look at websites like realestate.com.au or domain.com.au and analyse the properties as if you’re considering it for an investment.
Go to open houses and speak with real estate agents as if you’re realistically expecting to purchase that property.
Learn about the area and the other properties available in it.
These are all the little things that you can only truly learn from experience and from doing your due diligence on properties.
So there you have five tips on how to start investing in property. Remember that the first step is not as simple as going out and buying your first property. Do the background work and prepare yourself in order to become knowledgeable enough to start investing in property.