Getting over property investment fear
January 24, 2014 / Written by Rich Harvey
Buying investment property can be scary, especially if you've never done it before. It's a big financial commitment, and without previous experience, it's easy to second-guess yourself.
However, getting over these investment jitters can be as easy as taking a deep breath and taking stock of your financial fitness. There are a few questions you should be able to answer before embarking on an Australian property investment.
What are my goals?
Are you looking to supplement your current income by renting out a property to tenants? Do you want to buy a house in Australia, hold onto it for a number of years, and sell it for capital growth? Or do you simply want to build a substantial portfolio of properties that will fund your retirement?
There's no wrong answer to these questions, but it is important to have an answer. Jumping into property investment without any overarching goals in mind means there's no way for you to measure whether you've been successful.
Whether you're looking for immediate results or are considering property as a retirement investment, make sure you have an objective in mind.
Do I have a plan?
How do you intend to reach your goals? What strategies will you use to minimise financial loss and maximise profit?
No investment plan is fool-proof, but having one in place is essential to success.
For example, if you're looking to rent out a home for extra income, your plan should incorporate research into areas that are popular with renters, as well as account for how much rent you would need to charge and for how long before your initial investment is paid off.
Giving yourself strategic guidelines to follow is a vital part of succeeding in property investment. If you need help creating a plan, then it’s important to work with a professional advisor that has your best interests at heart. Ask us if you need help in developing a property strategy and plan.
Do I have the funds?
Have you saved up enough money for a property purchase? Are you in a good position to obtain finance from a mortgage lender?
Securing a loan is the final essential part of successful property investment, so it's important to take stock of your personal finances and determine if you're in a position to afford a property in Australia.
Will the property market grow?
Investing in property is a calculated risk and just like any investment you need to understand the risks and rewards.
Property investing is one of the best investment methods where you can leverage safely, enjoy a stable investment (from capital growth and yield) and know that the value of your investment won’t be as volatile as the share market. Property investing is generally a long term proposition. Don’t expect to be a millionaire overnight, but by gradually acquiring say five median priced properties over a 10-year period, you can comfortably set up a solid nest egg for your retirement.
Property markets move in cycles and looking at the history of Australian property prices should give considerable comfort. Back in 1993 Sydney’s median house price was just $188,000. In 2002 everyone was aghast that the median price hit $350,000. Today the current median house price is over $700,000. Property always looks cheaper in hindsight. Don’t wait too long to start your pathway to wealth today.
If you can honestly and thoroughly answer all these questions, there's a good chance your fear is misplaced and you're in a strong position to make your investment dreams come true.