5 Tips If You Are Just Getting Into Property Investment (Ep58)
If you make the wrong decision when you first start investing in property you could be set back a number of years. Or it may leave you so discouraged that you never invest again and thus never build a successful investment property portfolio.
Today we will explore some tips to get you started on the right foot if you’re just getting into property investment.
There’s a lot of background work and research that needs to be done before you become a property investor.
You can become successful by simply jumping into the market and hoping for the best. You can also strike it rich by betting everything you have on red at the roulette table. But just because you may win doesn’t mean it’s a good idea.
I believe that a better strategy is to go out and educate yourself first. You need to understand exactly what it is that you want to achieve and have a plan to achieve it. With this in mind you are more likely to achieve success than if you bet it all on red or buy the first property that you come across in the property market.
So what are some tips for those of you who are just getting into property investment today?
Tip#1: Read books
I have come across several books that have been most helpful in learning about property investment. I recommend that you read the following three books. One is specifically about property investment and the other two are more about your finances and understanding finances better.
Book number one is Steve McKnight’s From 0 to 130 Properties in 3.5 Years. This amazing book shows you how Steve and his business partner went on to – as you can guess – buy 130 properties in 3.5 years.
Steve goes into a great amount of detail about the calculations that were done on many properties and why they were great investments. He even talks about how he worked out that he’d be better off spending his time working at McDonald’s than he would have been doing his renovations.
I love this book because it shows you an actual experience of what someone achieved. It actually teaches you the numbers and how he came about achieving his success. It’s a great read and it can help you understand property a lot better.
Book number two is Robert Kiyosaky’s Rich Dad, Poor Dad. This book is a very easy read with a lot of stories. One of its more notable aspects was its redefining of the terms “assets” and “liabilities”.
He talks about an asset being something that flows money into your pocket and a liability being something that takes money out of your pocket. These may not be their traditional definitions but they have helped me increase my passive income both in property and in other areas of my life as well.
And book number three is another one by Robert Kiyosaky. It’s called The Cash Flow Quadrant and it shows you the four different ways that people earn money. People earn money as an employee or as a small business/self-employed or as business owners or as investors.
This book encourages you to think about which quadrant you want to be earning your money in. It forms a solid foundation about how you – as an investor – should go about earning your money.
Tip#2: Read investment blogs and magazines
Tip number two is to read a variety of investment blogs and magazines.
You can also read property investment magazines. Australian Property Investor or Your Investment Property are both great reads. These investment property magazines generally show real life examples of people who have invested in property and been successful.
It can be a bit de-motivating to read these articles. They have millions of dollars in equity and you don’t necessarily have that much. But generally it is great and inspirational to see that people are out there doing it and becoming successful.
Always beware of property magazines like Money Magazine. It’s a great magazine but it appeals to the mass market. It may not necessarily talk about the investment strategies that you want to use. It may also talk about getting rich very slowly and in very risk-adverse ways that may not be suitable to you.
Read the magazines with a grain of salt because they obviously have to be careful in what they say and because their information may not be relevant to your specific situation.
Tip#3: Set your financial goals
Tip number three is to set your financial goals.
It is very important to understand what you want to achieve financially before you start investing in property. One of the biggest mistakes people can make is to invest in property without first gaining an understanding on how their actions will impact upon their lives.
I personally set my financial goals in terms of cash flow and how much passive income I wanted coming into my bank account each month. Cash flow for me is more important than having equity so I set my goals in terms of how to achieve that.
Setting your financial goals before you invest is an important step to take. You can set your goals in whatever way is suitable for you.
Tip#4: Decide on the strategy that is best for you
Tip number four is to decide on the strategy that is best suited to you.
There are many different ways to invest in property in Australia. You can use negative gearing, positive gearing, capital gains, capital growth and subdivisions. You can do renovations, developments or strata titling.
There are so many different things that you can do as an investor and different ways that you can make money when investing in property. They are all great ways.
But one way is probably going to be more suited to you than another. It is important to understand which way of investing is most likely to help you achieve your financial goals. Then go out and learn more about that specific investment strategy.
I love positive gearing and I believe that it is the best investment strategy for me. I learned all I could about positive gearing investment properties so I could be successful in this strategy.
So find the strategy that works best for you and become an expert.
Tip#5: Practise and prepare
And tip number five is to practise and prepare so that you’ll be ready to invest when the time comes.
I take this again from Robert Kiyosaky. He wanted to invest in real estate but the time wasn’t quite right. So he and his wife practised and prepared. They learned about investing in property and did the cash flow analysis on many properties. They visited properties and spoke to real estate agents. Then when the time came and the market was right they were able to invest and became financially free quite quickly.
So speak to real estate agents and go to open houses and do the cash flow analysis on properties. Practice and prepare to invest so that when the time comes and the market is right you are ready to act.
So there you have five tips if you are just getting into property investment – some tricks that you can do before you invest and before you bet the house on red at that roulette table.