Why do over 70% of property investors only have one investment property?
It's believed “you can’t lose” investing in property, yet the statistics show otherwise.
One property does not make for a decent passive income in retirement, so why do many get it so wrong?
Some key points you need to take into consideration to mitigate the chance of failure.
1. Understanding the 'WHY'.
Every investor is different with different needs, wants and budgets so know why you want to invest in property. Many simply “know” property is a good investment yet that is not true in the vast majority of cases.
2. Have Strategy & Structure.
Know what you are aiming for. Ask yourself questions such as:
Is this a long-term play?
Is this a flip?
Should residential or commercial property be purchased?
Is it off-plan or established more suitable?
Should it be in my name, dual names, a trust or a SMSF?
3. Don’t Do It Alone.
Employ a great TEAM, instead of leaning on friends and family. A good team will consist of:
A good accountant or financial planner
A good broker or bank manager
A very good property provider whose due diligence is genuine, extensive and independent
A good property manager
4. Know Your Numbers - Cash Flow.
Understand every cost using conservative assumptions. Interest rates change, markets shift, tenants vacate, incomes and circumstances change. Know what it would cost to hold under difficult circumstances.
5. Proper Due Diligence.
Go into this journey with your eyes wide open. Gather as much education as is possible and do your due diligence on those professing to have done the due diligence.
Use experienced researchers, who understand how to de-risk this investment by working with reputable vendors, builders, and economic data.
6. Don't Involve Emotion.
This is a decision for the head and not the heart. This would probably be investors' biggest failing. Let the numbers do the talking…they are all that matter. This isn't somewhere to live this is a vehicle to make money with little impact on your life. To read more about avoiding emotion in investment decisions click here.
7. Be Patient.
Markets can take some time to come around so like with any investment, patience is essential. Being able to hold property through a cycle may be required and with most cycles taking 7-8 years. You may need to wait to see the type of growth you were aiming for. These things don’t happen overnight and generally take some time. Have the budget to wait it out, as a good investment property will come home to roost.
Now, make sure you learn from these errors commonly made and make sure that you can get above owning just one investment property.
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Warren Jacobs - Senior Property Investment Consultant at Meridian Australia
P: (02) 9939 3249
Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your individual circumstance.