It would be fair to say that many of us dream of one day owning an investment property that sets us up for the future and is the beginning of an impressive portfolio. Property may only represent one asset class, but it can be the most lucrative and gives you a tangible possession that won’t take the market hits that other investments can be exposed to. If you are in a position to purchase your first investment property, there are a few variables that you will want to understand before you take the plunge, so let’s find out what goes into becoming a property investor.
The management of your property
Most property investors will have a ‘hands-off’ approach and will instead enlist reliable property managers to ensure that the property is tenanted, maintained and not requiring too much of your time and attention. If you think that you can do this role yourself, then you are not thinking like a savvy investor. Smart investors secure a property and establish a framework that automates income and allows the investor to spend time seeding new investments. If your own time is dedicated to responding to tenant requests and fielding applications – your rental income will not justify the full-time job that it has become and you are robbing yourself of another investment opportunity in the market.
Research and expertise
A property investor does not buy the right house at the right time by accident – it is a premeditated decision that has been made with research, property resources and often the guidance of industry experts. If you are serious about becoming a property investor then you want to get familiar with property podcasts, real estate data sources, blogs and even training courses to bridge your knowledge gaps. Be sure you are always educating yourself with information that is relevant to your country, as property processes and legislation can be astronomically different from one country to the next.
You might also benefit from meeting with a buyers advocate. A buyers advocate is a professional who studies the real estate market and the suburbs and cities in which potential properties reside, and makes a recommendation to a keen investor on what property might be the best investment. If you are one to attach emotion to your property purchases (as many do) then a buyers advocate might provide valuable input and save you from buying something you love that won’t necessarily perform as well.
Understand your financial commitments and risk
When comparing property investment with other asset classes, many financial advisors will say that there is less risk associated, although that’s not to say there is no risk. If you want to become a property investor, find a financial advisor that is going to assess your financial position and advise what house price you should be expecting to buy and any associated costs that come with property ownership (building and pest inspection, solicitor, etc). Successful property investors are responsible investors, so prepare to get intimate with your finances before you take on any risk and expand your portfolio.
Another seemingly obvious question that your financial advisor will ask you is – what are your financial goals? If you haven’t had time to think about this you will need to understand where property investment fits within your longterm goals and how this is going to bring you wealth. Having clear objectives and knowing your values is only going to inform better property decisions.
There are many decisions and experiences that will contribute to your knowledge and success in property investment. Property is a great addition to any portfolio and with the right support and financial guidance behind you, these property investments can tale care of you for the rest of your life.