The property investment process, simplified

Mr Waters highlighted: “Never shortcut the process—that’s the bottom line for us.”

“If it starts to get too exciting, then you're probably doing it wrong. For us, it's all about how boring can we make this, because the more boring it is, the smoother the processes are,” he said.

These ‘boring bits’ of property investment, away from the excitement of an impulsive purchase and unforeseen problem-solving, are often the most important bits which could draw the line between success and failure.

“Like most property investors, you get hooked on the exciting bits, but it’s all the other stuff that you need to get right, particularly in portfolio management. That can really change the outcome of your portfolio,” according to Mr Waters.

Smart investors find ‘excitement’ in managing the assets properly and minimising risks, staying true to every step of the process and working hard to drive into their own portfolio through good research and mentorship.

The process

No matter how some people like to believe that investing in property is a ‘leap of faith’ and, thus, a little haphazard, Mr Kumar strongly advised all aspiring investors to be as regimented as possible from the very beginning.

“Regimented in the sense that you need to do A before you do B, for example,” according to him.

While each investor will follow a different path throughout their journey based on their goals, capabilities and limitations, there is a thought process that every investor can follow to succeed—from purchasing the property to managing the portfolio.

Mr Kumar and Mr Waters enumerate the basic steps of a successful property investment journey:

1. Determine your goals

The first thing that every investor needs to do before even starting to consider areas and properties is to set their goals, particularly the long-term goals that will be the basis of their strategies throughout their wealth-creation journey.

Ask yourself: What do I want to achieve? How do I get there?

By crystallising your goals as early as the beginning of your investment journey, you can easily work backward and determine the next steps to take in order to achieve your goals.

Mr Kumar said: “The first thing that needs to happen is you need to be working out what you are aiming for and which team members you’re going to bring together to help you achieve that so you're all pulling in the one direction.”

Essentially, goal-setting allows you to determine your Point B (the endpoint) and ultimately map out the path you would have taken from Point A (where you are right now).

2. Educate yourself

Naturally, mapping out your strategies will require certain knowledge and skills in property investment.

Before picking an area to invest in or choosing a property to buy, make sure that you understand exactly what to look for. After all, not every beautiful home will make a good investment, so be careful not to pull the trigger prematurely.

According to Mr Kumar: “Often, what I find is with the budding investors, particularly those that have just started listening to podcasts and getting some real education behind them, is that they pull the trigger a bit too prematurely without actually thinking it through.”

“There is a lot of moving parts to this process. It doesn’t end in where we're buying, what we're buying and what we're aiming for,” he added.

3. Purchase well

Once you have gained the knowledge and skills necessary to navigate the property investment landscape, it’s time to consider where to make your first purchase!

From this step onwards, the process could be slightly different from one investor to another, depending on their chosen area, property, home loan, lender, terms of the contract, investment team members, finance strategy and other factors influencing the purchase and management of the property.

Mr Kumar said: “Once you've got the property and the contract, you've got some milestones that you need to meet. You've got some pertinent searches that you need to do.”

“How do you communicate with the solicitor? What's the mode of communication there and then, of course, what happens before you go unconditional? What's the process there? What are the various things that you must do and what are the things that are good to have, but is not absolutely necessary?

“We need to identify those things, as well as tenancy details or what needs to be done to get this property tenanted. From there, you’ll be moving towards the settlement,” he added.

Most people consider the period between the exchange of contracts and settlement as a moment to take a breather after the long purchasing process. While investors enjoy this lull period, the professionals get to work in order to ensure that everything is in order—from finances to legal matters.

This step highlights the importance of engaging trustworthy and reliable professionals as a big chunk of the purchasing process will depend largely on them. Make sure that while they are doing the legwork, you’re not kept in the dark about every detail of your investment.

“There's a lot of work that happens in the background, which we could do without necessarily exposing the client to a myriad of different things. One of the most important ones is making sure that the conditions in the contract is actually adhered to,” according to Mr Kumar.

Take time to do the necessary inspections to ensure that you’re getting the property you paid for, without any surprises that might cost you more along the way.

4. Manage the property well

Once the purchase is done, there will be different paths for investors to choose from moving forward—from putting it on the rental market, leaving it vacant and have it sold once it goes up in value to renovating and developing the real estate asset.

Whichever path you choose, Mr Kumar reiterates the importance of good management of the property for as long as it sits in your portfolio.

“What needs to happen? Are you going to self-manage or work with a property manager? How are you going to make sure, for example, that you can get it rented out in a quick, easy format? You're also looking at your essential repairs if you're buying established properties. You need a timeline to make sure it does happen,” the property strategist said.

The property strategist strongly advised investors to be on top of all aspects of investment management, from simple housekeeping to regular portfolio reviews.

He said: “Are you buying rapidly or at a more sedate pace? Set a consistent process, whether that is every three months or six months, for reviewing the performance of your assets.”

5. Move forward

Finally, once the purchase is finalised and the property is tenanted or well-prepared for any investment plan you have, it’s time to think about what’s next.

Growing a portfolio will not be an easy feat as you will have to face unpredictable economic fluctuations and market movements. As it is, creating wealth through property will not be a passive journey.

“There's a lot of moving parts in there. The bottom line is, a lot of people think that property investment is where you buy a property and its passive and things will just happen, but on the contrary, there's a lot of things that you need to have your finger across,” Mr Kumar highlighted.

Cash flow management

Once you moved forward from the first property to buy more and ultimately grow your portfolio, property investment will be two processes happening simultaneously—accumulation and management.

As you let your portfolio grow by buying or building properties, you are also responsible for the different tasks that will ensure that they are kept in best condition, physically and financially, and their wealth-creation potential is maximised.

In order to keep your portfolio healthy despite unpredictable market conditions, Mr Waters encouraged looking at the common denominator for every investor, which is cash flow.

According to Mr Waters: “People can overcomplicate the whole scenario but there's a few key ingredients which'll make it easier. You control what you can control and you leave the rest as it is, but the common denominator is that the cash flow is managed because while the cash flow is managed, it gives you some flexibility whether times get good or tough.”

“The state of your wallet dictates the state of your mind. The process is more of a learned habit and I don't think it’s that complicated as long as you keep on top of it. It doesn't need to consume you but there are fundamental things you need to do step by step along the way

“Park time aside where you can go through the numbers accurately—this is important. Don't do it in front of the TV or in front of the kids or anybody else and not at work during lunch. You will need to park a weekend aside and just go through the numbers. The worst thing that you can do as an investor is not knowing where you are,” he added.

Mr Kumar also encouraged investors to be willing to adjust their mindset and strategies and adapt to current market situations to achieve their goals.

Despite having access to various professionals who can help you navigate through the investment landscape, you have to be accountable for every decision you will make for your portfolio. Take ownership and be in control of the wealth you are trying to grow.

“Number one, you have to know where they're going. Number two, you have to know why you’re going there and number three, you have to be constantly aware of where you’ve been,” Mr Kumar said.

At the end of the day, property investment is not as complicated as most people make it out to be, he said. In fact, once you have gotten the hang of the process you have established for yourself, it could be quite simple and even easy.

Tune in to Investing Insight's May episode with the Right Property Group to know more about the strategies, tactics and techniques to create wealth through property investing.