If you want to be an elite at anything in life, you need to work hard to achieve your goals. Elite sportsmen have to train hard, scholars have to study hard and to advance in your workplace, you have to work hard.
If you want to be a successful property investor, you have to work at it. Here’s what you need to do to become Property Fit and become a success property investor.
First you have to understand that you need to leverage to invest in property. Because property is expensive, you generally will only have the deposit to put towards the purchase price being 20%. Therefore, you will need to borrow money from the bank of up to 80%.
Here is the first shift in thinking you must understand: that going into debt is not always a bad thing, assuming you acquire the right asset that produces the right return. Don’t be scared of debt as it is your friend if managed correctly when you a property investor.
Many of us have been conditioned in thinking debt is bad. I agree that some debt is bad, like credit card debt and short term loans for cars and holidays. These are not ideal. However, good debt is that which is applied to gain leverage in a solid performing asset like property.
Work hard and save, save, save. There is really no other solution to getting a deposit together which amounts to about 20% of the purchase price. Money doesn’t grow on trees. You need to sacrifice and build this deposit as soon as you can.
Prepare a monthly budget to track expenses and cut down on wasteful luxuries. If you are earning, say $45,000 after tax, you should be able to put aside at least $20,000 pa, which means in five years you will have accumulated at least $100,000. If you have a partner, that’s a combined $200,000 that can be used as a deposit on your first property. You can fast track this by working two jobs.
This is the most important partnership in your quest to become a fit Property Investor. You will generally only have a 20% deposit of the purchase price, therefore you will be asking your banker to lend you 80%.
You need to convince your banker that you are a fit person to lend this money to. That means you will need to show them that you have a track record of steady employment and saving so they will feel confident in lending you the money, knowing that you have a culture of both saving and working and being able to make the monthly mortgage payments.
Don’t expect to just turn up to the bank and they will give you the money. The relationship with the bank starts many years before you buy a property, during your early working life and your saving culture.
Just like an elite sportsman that requires coaches and Physios to enable them to perform at their peak. As a property investor, you to need to surround yourself with a team of professionals to guide you through the process and ensure you make the right decision.
Your team should be made up of the following: Banker (assist with finance), Real Estate Agent or Buyers agent (assist with buying and managing property), Lawyer (assist with purchase contracts), Quantity Surveyor (assist with depreciation write-offs) and Accountant (assist with tax and structures and cashflow with tax savings).
Yes, negotiate on the purchase price of a property but don’t skimp on the costs of the services of your team. If you don’t get the right advice, it could cost you thousands.
You need to understand how the property market in Australia works. Not all properties perform the same: properties in different states, different cities and different streets all have varying returns. You need to understand how demand and supply works and look for areas that are in high demand with low supply. These are areas that the bulk of people want to reside close to the centre of major cities with transport links, good schools and shops .
You need to research the returns that you could expect both in the form of rent and capital growth in a particular area so that you mange ongoing cashflow. You will need to meet with your accountant before you exchange a contract so that he can explain how negative gearing will impact your cash flows and the potential to lodge a PAYG Variation with the ATO so as to claim your refund back quicker.
Now that you have the right mindset, you have saved the deposit, your bank is onside and approved a loan, you have sought advice from your team and you have sourced the right property in the right area, you are fit to purchase the property.
Be guided by your Agent or Buyers agent but just understand that the real estate agent acting for the vendor is working for them and trying to get the best price possible for their client and not you. An independent buyers agent will be working for you as you will be paying them.
If its an off the plan purchase, have your solicitor help you understand the terms and conditions of the deposit and settlement. There are a number of online tools that you can use to get an indication of recent sales in the immediate area for comparison and the sales history of your particular property.
Once you have settled on the property, you now need to secure ongoing cash flow by sourcing the right tenant and ongoing management of the property. Interview a couple of Agents and get references from tenants. The good agent will manage your property on your behalf to ensure rents are collected on time, minor repairs and complaints are handled on your behalf, giving you peace of mind
What can you do?
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