Bessie Hassan | Money Expert at finder.com.au
If you’ve decided to take the leap and invest in property, there’s some groundwork you need to do before you start comparing finance options or interviewing prospective tenants.
Property investing requires research, financial discipline and good management, so make sure you’re prepared and well-versed in the property investing arena to maximise your chances of success and to avoid things going haywire.
- Prepare for the costs
You’re kidding yourself if you think property investing isn’t going to cause a dent in your bank account, so one way to preserve your sanity is to prepare yourself for the costs involved.
Whether it’s stamp duty, insurance, loan costs, repairs and maintenance or advertising for a tenant, get up to speed with the costs related to property investing.
Once you have an idea of the costs involved, you’ll need to make changes to your financial habits so you can free up some cash before you acquire a property (and apply for a loan).
Firstly, look at your existing financial accounts and obligations and consider how you can focus on paying off any outstanding debt.
If you have more than one credit card and you notice you’re paying too much interest, apply for a balance transfer credit card with a 0% interest promotional period so that you can repay the debt during the interest-free period in one affordable payment every month (rather than two or three).
Alternatively, negotiate a better deal on accounts such as your Internet plan or your household utilities so that you can generate some savings. Any surplus cash will go a long way to helping you cover the costs of holding your property over the long-term.
- Workshop your investment strategy
When investing in property for profit, the two most common strategies are “buying and holding” – this involves purchasing a property, waiting for it to appreciate in value and then selling it for a profit – and renovating.
To give you some direction for your finance and property decisions, it’s best to have a clear understanding of how you plan to make an income from your asset.
If you’re unsure, speak to your tax accountant or a financial adviser about the best investment path for you.
- Select a loan that’s right for you
Depending on your investment strategy, you’ll want to ensure your loan has features that can maximise tax benefits. For instance, you may want to consider an investment loan with interest-only options and a linked 100% offset account. Finding a loan with a competitive rate is also key.
- Know how to minimise risk
Like any investment, buying an income-producing asset comes with a degree of risk. You should do all that you can to minimise that risk and the good news is that there are plenty of ways to go about this.
Having a cash reserve to cover unexpected costs (eg, an untenanted period), investing in different property types across different markets and conducting suburb research are just some ways you can minimise your investment risk and ensure project success.
- Be a responsible landlord
There are certain rights and responsibilities that you should be aware of if you’re going to manage an investment property. Some of these include providing the tenant with a copy of the tenancy agreement, lodging the bond with your state tenancy authority, giving the tenant notice prior to entry and dealing with any tenancy-related issues.
To learn more about your responsibilities, jump online and visit your state government website.
Becoming a property investor is a big commitment, so it’s essential that you prepare yourself both mentally and financially. Do your research, compare finance options, minimise your risk and understand your responsibilities and you’ll increase your chances of maintaining a profitable investment
Bessie Hassan is the Head of PR Australia at finder.com.au
An accomplished public relations professional, journalist and editor, Bessie landed her first job in publishing while at university. After graduating with a Bachelor of Business majoring in Marketing from the University of Technology Sydney, Bessie quickly climbed the career ladder and went on to work for a range of iconic publications with her widely published byline appearing in The Sydney Morning Herald, The Australian, Marie Claire, and Women’s Health, among many others.