Are you really ready to buy an investment property?

Information provided by Buy Property Direct
David Brewster, Managing Director of Buy Property Direct

Over the years I have sat with many families looking at purchasing an investment property. Quite often they know they want and need to invest, but then confusion sets in. Every ‘lunchroom expert’ they mention the idea to provides a different opinion, angle or spin on property, and what “they should do”.
So before you buy an investment property, here are a number of things to consider before you get to the property selection stage.
It's your financial future so firstly, it's all about YOU.
Before you embark on the journey you should consider the destination. What exactly are you trying to achieve out of your investment? Is it long term financial security, education for your kids, a little extra cash flow or return on capital you may have already grown? Are you looking to get one property because your friends did, or are you looking to grow a multi-million dollar portfolio?
Once you have a clear direction of what you are trying to achieve, you then need to look at your own personal situation and what phase of life you are in: married, single, young family, teenage kids, or ‘empty nesters’ with retirement looming closer? What is your current income and debt level, and what are you comfortable with?
It's important to confirm which type of investor you wish to be - passive or aggressive? What risk profile are you comfortable with, and what can you really afford? If you are in a relationship this is something you should discuss in detail, as it is essential to be on the same page when making long term financial decisions.
Once you have answered the above questions, you can then start to develop a plan. For some it may involve debt consolidation and a savings plan, and for others it may be to unlock equity/use savings to start investing. Or it may even be to make better use of your superannuation balance and begin investing within a self-managed super fund (SMSF). Only you can start answering these questions after you know the destination. After all, you don't get in a car without knowing where it is you want to go. Investing in property should be no different.
You will commonly hear people say "consider your property investment a business and don't get emotional about it". This is absolutely true. Property investment is all about the numbers; returns, growth and leverage just like any other business where cash flow is king.
So consider what type of business you want to run. The right team of professionals and advisors within your business will make the process a lot easier. Specialists in their field such as brokers, planners, wealth coaches, builders and property specialists, plus naturally some research on your part, will ensure accurate decisions are made in the interests of creating wealth.
Make sure you supply all documentation required and return correspondence in a timely manner to your financial planner, maintaining a constant flow of communication with your team. This sounds simple but so many people don't make this a priority and cause themselves unrequired stress. Remember, this is going to be your business, and while you may not see returns every day, your portfolio will be worth hundreds of thousands, even millions, of dollars to you in the future. The more energy you put in the more return you will get.
Be prepared for success.
Once you have considered the above you are ready to start your investment journey.
At this point investors are probably fairly excited about the prospects the future holds. So when you discuss your plans with others, be prepared - they may not share your enthusiasm and may even be quite negative. This can be for a number of reasons varying from not understanding property investment, to reading a negative article in a paper two years ago (that fed their own fears), or it may just be they’re not willing to take control of their own finances and are afraid you are getting ahead. The reality is they probably don't know your financial situation so don't let these people occupy your head space.
You now have a goal, a plan, a team and a new business venture. Work hard, grow your business, and enjoy the journey.
David Brewster is founder and Managing Director of Buy Property Direct. The company started with the simple mission of helping ordinary Australians understand the benefits of property investment, and is uniquely different to other investment companies. Buy Property Direct personally select and develop land, and then sells direct to the investor. David and his team provide the full range of investment services across property management, tax depreciation schedules, life insurance, superannuation and mortgage broking.

Disclaimer: while due care is taken, the viewpoints expressed by contributors and/or sponsors do not necessarily reflect the opinions of Your Investment Property.

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