I am often asked about the merits of property investment. Invariably my answer is that like most things in life, some do it well and others don’t.
So what do you need to do to be a successful property investor?
Buying a property doesn’t need to be complicated, your aim should be to buy a good property, cheaply. As a friend once said, “you usually make your money when you buy, not when you sell”. He meant that in most situations, the buyer drives the hard bargain, not the seller.
Buying cheaply also means borrowing money at the right price and keeping purchase costs to a minimum. Be aware of ongoing costs, such as land tax and strata fees. Before you buy an apartment find out what costs are passed on, particularly in relation to lifts and other infrastructure. You may be paying for lift maintenance even if your unit is on the ground floor.
A major decision is whether to buy close to home or interstate. Many investors have bought interstate properties through road show style seminars on the basis that the “grass is greener on the other side”. Whether such properties represent good value or have much investment potential is often open to debate.
Most people have some understanding of their local market, what are good suburbs, and what is a reasonable price. There is much to be said for buying locally, perhaps not in your home town, but in your home state.
Investors often put their life savings on the line buying an investment property. Buying locally means that you are able to drive past your property to check that it is rented to the quiet retired couple, rather than the local bikie gang.
The national property market comprises hundreds of local markets and submarkets. Astute buyers even identify streets that they like and watch for houses coming on the market. They have finance ready and are in the position to make an unconditional offer, a sure winner in a competitive market. By doing your homework you can get to know your particular market and be able to recognise bargains when they come up.
The market is cyclical, with numbers of buyers reflecting current economic conditions. Savvy buyers recognise the state of the market and use it to their advantage. Remember that bargains usually come about because the vendor is in a hurry to sell, and the buyer made a low offer.
And don’t forget the investor’s golden rule, “if it looks too good to be true, it probably is”.
