How To Get Into Investment Property (Ep66)
Investment property can be a great way to grow your financial success and even secure financial freedom. But how can you get into investment property and how can you get started in real estate?
Today we’re talking about some tips to help you get into investment property.
Tip#1: Set financial goals
I always come back to this point because it is very important.
Many people go out and purchase property without setting financial goals first. They don’t know what properties are going to help them achieve their financial goals because they don’t have any goals.
You can put yourself in a much better position to achieve financial success if you set financial goals and understand exactly what you want to achieve. You can then purchase properties that line up with your goals.
You can check out my other videos on how to set financial goals.
Tip#2: Calculate your borrowing capacity
Tip number two is to calculate your borrowing capacity.
This is really simple to do. All you need to do is Google “What is my borrowing capacity?” or “How much can I borrow?” This will provide you with a bunch of loan calculators.
These are calculators that the banks have created for online use. You can punch in your details – how you much you earn, what your rent is, all these sorts of things – and it will estimate what your borrowing capacity is.
I suggest speaking with a mortgage broker if you want to get a more accurate statement. They will help you assess how much you can borrow because different lenders may allow you to borrow greatly varied amounts. Speaking to a mortgage broker will give you access to a large resource of lenders and they will be able to tell you which one is best suited to you.
Generally it is a free service that they offer to you. But mortgage brokers do make a commission when you sign up for a loan so don’t just use and abuse them because it’s free. They need to be paid for their services eventually.
Tip#3: Start saving your deposit
Number three is to start saving your deposit.
It’s very hard these days to purchase an investment property if you don’t have a saved deposit and proven savings.
The exceptions could be if you receive a generous gift of the 20% deposit from someone else or if someone’s willing to go guarantor for you on your loan. Otherwise you’re going to need to save some of your deposit.
Banks are generally looking for a minimum of 3-5% of proven savings. This means that you prove that you’ve actually saved your money over time – it’s not just a lump sum that you got from someone else.
The banks want to see that you have the ability to save money and therefore the ability to pay your loan. You could use a first home-buyer account or you could just save it in your own account.
Add to it on a regular basis and use it to show the banks that you’ve saved your deposit.
Saving a deposit will obviously put you in a better position to be able to purchase a property. But check out my other videos – “How to invest in property with little money” or “How to buy investment property with no money down in Australia” – if you are interested in buying a property with no deposit.
Tip#4: Start learning about property investment
Tip number four is to then learn all you can about property investing.
It’s going to take you some time to save your deposit. You may as well start learning about investing in property while you’re doing so.
There are so many steps that you need to take and so many things that you need to consider if you want to invest in property. It pays to start learning before you need to know it.
You need to know about financing. You need to know about researching the areas. You need to know about building and pest inspections. You need to know about getting solicitors or conveyancers. There are so many different things that you need to know.
I do suggest you read the book From 0 to 130 Properties in 3.5. Years by Steve McKnight as a starting point. It will give you a good overview of how he purchased so many properties. He also goes into great detail about cash flow and so forth.
You can also read magazines like Australian Property Investor or Your Investment Property. Or you can simply go through Positive Cash Flow Australia. Watch more videos, listen to more podcasts or read some more articles.
But start building up your experience and your knowledge before it comes time to invest.
Tip#5: Get loan pre-approval
Tip number five is to get pre-approval.
So you’ve set your financial goals and saved your deposit and learned about property investing. Now it’s a good idea to get pre-approval before you start making offers on property.
You can do this through your mortgage broker or through your lender of choice.
And basically this means that you are pre-approved for a loan based on a clause of the valuation of the property. You will be able to move so much faster when it comes to making an offer and buying a property.
You will only need to get the property valuation and a few other small steps done and then your loan is given to you.
The pre-approval process takes time and could hold you up from purchasing a property. So getting pre-approval ahead of time is a great idea if you’re trying to get into investment property.
Tip#6: Start researching
Tip number six is then to start researching.
Research properties and research the area. A lot of people will go out and look at two or maybe three properties and then leap into a purchase. But they haven’t done their research and they don’t know whether their property is overpriced or whether it’s a great deal. And they don’t understand whether or not their area is going to grow.
I’ve gone into great detail on this at Positive Cash Flow Academy so check that out if you want more information on doing research of the area.
I do recommend that you follow the 100/10/3/1 Rule. This is used by many successful property investors.
The general idea of this rule is: you look at one hundred properties and make offers on ten. Of those ten offers perhaps only three will be accepted. And of those three that are accepted you’ll purchase one property.
So do your research and buy the right property that’s going to grow and deliver the financial rewards that you seek.
Tip#7: Calculate ALL of your expenses
Tip number seven is to calculate all of your expenses.
Don’t just assume that because your mortgage is $400 per week and the property rents for $450 per week that your property is going to be positively cash flowed. It probably won’t be.
There are a lot of expenses associated with investment property that you need to consider before you invest. This includes everything from council rates to property management fees to insurances and many others things.
Or you can check out the Advanced Property Calculator over at Get the free eBook. That will then allow you to punch in all the numbers of all your expenses and then it will pop out the cash flow that the property is likely to generate.
Do the financial analysis on the property. Make sure you understand all the expenses before you go ahead and invest. You definitely don’t want to purchase a property only to discover that you really can’t afford it.
Tip#8: Take the leap!
And tip number eight is to then take the leap and invest in a property.
Robert Kiyosaki – the author of “Rich Dad, Poor Dad”, one of the greatest finance books of all time – suggests that you start by investing in smaller deals first. Grow your experience. You might lose money on those smaller deals or you might make a little bit of money.
As your experience grows then your chances of making more money on each and every deal goes up.
So there you have some ideas on how to get into property investment.
Until tomorrow – stay positive.