5 secrets to buying the right investment
Buying the right property is the key to a successful property portfolio. Here's five tips to help you identify the best property for you to invest in.
Property investing has definitely got its upsides and its downsides. Talk to any property investor and they will tell you that there is as much opportunity as there are pitfalls. Now, the skill lies in navigating these in your favour in order to make your property investing most profitable.
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The most common words of wisdom heard from those that do well with their investments are; buy with your head, not your heart; and the profit is in the purchase.
This is where most investors and especially those new to property investing, go wrong. Most tend to treat buying an investment property just like buying their home, which translates to an emotional buy. When it comes to buying right, this is where most go about it the wrong way too.
Commonly, we tend to look at agents’ windows, websites and the big property portals for suitable properties as an investment. Yet, there are other ways to go about it if you want to buy with the added value of either having fast capital gain, scope for improvement, subdivision or even development potential.
Ultimately, when we want to buy any other product at the best price, we look at ways to buy from those that need to sell; how we can get it at a reduced price; buy it at wholesale or direct from the producer. Come to property, most investors look only at the retail end, which in most cases means that they are paying a premium price to begin with.
‘The biggest profit is made at the point of purchase’, I have been told too many times from successful investors to ignore. And, with my many years in the finance, lending and the property investing industry, I get what they mean. I have spent enough time interviewing investors to learn just how one can go about it in a smarter way, which means getting into the market better and having a better performing investment. Yet, most inexperienced investors don’t.
Just like a personal trainer at the gym, or a professional coach for your career development, a property investment mentor is there to help you to understand and navigate the ins and outs of property investing, work out the best strategy for your circumstances and goals, and support you in structuring and buying right when you are ready to purchase.
It surprises me how many new investors make some of the most common mistakes and all too often costly ones. Mostly, at the time of purchase.
While, there is a myriad of resources and information available in the market to identify the best areas and spots to invest in, many newer investors tend not to know how to access the right data and use this information in the best way, in order to buy right, and often end up making unnecessary mistakes.
Here are my five key tips on property investing:
- Always look for strong growth opportunity areas where the property is located in close proximity to public transport, work centres, shopping, good infrastructure and education
- Get pre-approval of your finance, allow for some flexibility and don’t over-extend yourself
- For an investment, let the numbers do the buying (head), not the heart (emotions)
- Speak with a professional versed in property investing about how best to structure your investment, i.e. buying it in a trust or entity rather than your own name, using your superannuation/SMSF etc.
- Do thorough due diligence and look at growth patterns and history before you buy, making your decision based on facts rather than word of mouth
Too often I find people are buying investments based on hearsay and secondhand news, which often means that there is a lack of facts and thorough research or they are buying in areas that are already ‘old news’ in which case they are likely to pay a higher price and already diminish their investment’s gain right from the start.
Buying right, does make all the difference. It is important to remember that wherever you buy, even when you are buying off-the-plan, that ultimately the agent is selling for the vendor/developer and the aim is not to help investors to buy right, but to sell them a property. Many investors forget that this is the underlying principle when they start looking at properties. That is why it is so important to be selective to ‘who’ and ‘what’ you are listening to.
There are plenty of investing seminars out there and stock to be found, but it is advisable to look for an experienced property investing coach before you rush out and buy something, especially if you are new or inexperienced to property investing or don’t know the area you are looking to invest in.
