It is so exciting to buy your first investment property: it can also be nerve-wracking, stressful and even downright scary, but at some stage in the process you’ll feel the rush of adrenalin that tells you that this is a major milestone in your life. Buying investment property is not for the faint-hearted: it should never be done on a whim, nor as an emotional buy.
Most of us know this. We know that we should be level-headed and serious about this big step we are making. We’ve heard the horror stories about investments gone wrong, about the tenants (or property managers) from hell. We’ve heard about people forgetting to insure their property, about people self-managing (and getting those hideous midnight phone calls to come and fix something). We swear to ourselves that we will do it all properly: we will crunch the numbers, do the research, speak to all the right people, and make a good decision.
Trouble is, many of us don’t take the time to get educated about buying investment property. We might have been advised by our accountant or financial planner that an investment property would fit nicely into our financial situation right now, generally as a negative-gearing strategy. So we pull out the real estate supplement of the Saturday paper, and begin our hunt for the perfect property.
Buying Investment Property: How Do You Know Which Property Is Perfect?
What is the perfect property? If we aren’t very clear about our investing objectives, and we don’t really know what strategies are available to us, it’s very hard to know what a good investment property is. So how do we buy? On price? On location? On presentation? On rental return? How the heck do we know what makes a good investment property?
The first thing you’ve got to do is decide what your desired outcomes are. Is the slow accumulation of property value what you are after, or does the idea of a quick property turnover or instant cash flow more to your liking. We certainly like the faster money making strategies here, but there is always a place for long-term strategies as well.
Then you’ve got to get educated. Don’t rely on your accountant or financial advisor, unless of course they actively invest and have the same financial situation and desired outcomes as you do, in which case you might watch what they do very closely and mirror it as well as getting an education. Buy some books (there are some of our favourites on the resource page), attend a seminar or two, do a workshop or join a coaching group. Find out what options are available to you to achieve your desired outcomes.
The third step in buying investment property is to learn how to do proper due diligence and how to accurately analyse any property you are thinking of purchasing. The best way to do that is by using John Bone’s Real Estate Analysis Software. Check it out on the features and benefits page. Accurate analysis of a property is the only way to know whether it is worth adding to your portfolio. It’s a critical step that too many investors fail to take.