Most people think that purchasing an investment property is a pretty straight forward exercise. That is, until they start the process.
The majority of people I’ve met think that investing in property is as simple as getting a loan, buying a property, putting in a tenant and then the job is done. Right?
To be honest that’s exactly why most people who invest in property only buy one or two properties. They don’t fully understand exactly ‘what’ real property investing involves.
To get property ‘investing’ right, you need to be analytical and consider what will serve you best.
Let me be very clear on this point – it is not about which property or which location that’s most important – it is all about your Strategy.
What is your goal when investing in property?
Here are some fundamental questions that need to be asked before even considering purchasing:
How will the purchase be structured financially?
Is it better to ‘fix’ the rate or stick with a variable interest rate? What are the pros and cons of each?
Is it better to pay Principal and Interest or Interest Only?
Can the debt be paid down on an Interest Only loan? If so, how is it done?
Is it best to just take the lowest interest rate available? What are the pros and cons of that decision?
How should the property be structured for tax and lifestyle purposes?
Should it be a positive cash flow property?
Should it be negatively geared?
Should it be purchased in a SMSF?
Should it be purchased outside Super?
Should the entire loan amount be spent on one property? In other words, if preapproval is for $700k is it better to purchase just one property or should two properties be purchased?
Which property type and location will suit my Strategy?
Notice that the property type and location are the last factors to be considered. It is far more important to firstly put in place the correct finance structure and entity before even considering the property type and location.
Experienced investors already know the next property type they will add to their property portfolio because they understand what will best fit their Strategy.
Using the services of a professional and experienced Buyer’s Agent to assist in the purchase of an investment property keeps the buyer on track to build a strong property investment portfolio. The value in accessing this service far outweighs the cost of indecision or making disastrous investment decisions that can mean being locked out of the property market for years. The difference could be purchasing one or two properties without using a Buyer’s Agent or building a portfolio of 10 properties using the services of a Buyer’s Agent.
A skilled and experienced Buyer’s Agent can usually negotiate the cost of their fee off the purchase price and provide valuable professional advice throughout each step of the purchase process.
The information contained in any material presented by the author should always be considered general information and the reader must seek professional financial, investment advice before making any investment decisions.