Knowledge, number-crunching and a nose for the next big area… these are all great traits for a successful property investor.
However, there are some other things you should know before you get started.
Here, in no particular order, are the top tips from Chris Gray, the CEO of Buyers’ agency Empire and the host of Your Property Empire (Sky News), and Stephen McCarthy, managing director of property investment advisors, the McCarthy Group.
1. Educate yourself
Before taking the plunge into any new field it makes sense to bone up on the subject matter.
“You are never going to have all the knowledge, but there are lots of blogs, websites and books on property investing,” Gray says. “I recommend you buy every book you can on the subject. If you read one a week over a few months, your knowledge of property investing will go up massively.”
2. Surround yourself with experts
If you’re currently taking investment advice from your parents, cousin or best mate, stop. While your friends and family usually have your very best interests at heart, they are not usually property experts.
“Most people ask friends and family [for advice], but they’re not qualified to give advice, and are generally very cautious,” Gray says. “Go and see advisors who deal with these decisions every day.”
Gray recommends enlisting the help of mortgage brokers, banks and accountants for starters.
“All of these advisors can hold your hand through the necessary steps,” he says. “A lot of these advisors can be free, but even if you’re spending a couple of $100 an hour, it’s definitely money well spent.”
3. Crunch the numbers (before you buy)
It’s common for people to buy property before figuring out whether they really can afford it, McCarthy says. The preferable method is to do things the other way around.
“By getting the full financials on a property – including your tax benefits – you can work out and then decide whether you can afford it or not,” he says.
“Most people see a property, fall in love with it and then find they have to sell it down the track.”
4. Buy well
While it is every property investor’s aim to pick the next hotspot, sometimes it pays to remember the old adage about the hare and the tortoise, Gray says.
“Hotspots are often media-driven,” he says. “Established suburbs are always very consistent when it comes to capital growth and rental yields. Do you want the hare or the tortoise?”
McCarthy raises another old favourite: buy with your head, not your heart.
“A property investment is an investment, not a lifestyle choice,” he says. “Any time you want to combine the two, it’s not a good investment. Use your head, not your heart, otherwise it can be a recipe for disaster. It’s all about the numbers.”
5. Think about your tenants
Remembering who is going to rent your investment is something many people overlook, McCarthy says.
There’s no point in buying a luxury apartment in an area where most people can’t afford to rent that kind of accommodation.
“You have to buy property that’s affordable for people on the average wage,” he says. “Most people will spend about one third of their income on rent. So if your weekly rent is higher than that, you will struggle to find tenants.”