10 Tips on How to Become a Successful Investor
What makes one investor more successful than another? We’ve put together 10 tried and true steps that successful investors use to help steer their decisions to help them get the most out of their investment.
1. Do your Homework
Nothing makes for a better investment foundation than solid research and a sound understanding of the property market. Start your investment journey by reading investment blogs, scour investing websites, attend investing seminars or download and listen to investment podcasts. Make friends with other investors and discuss ideas, carry out research together and share your success and failures.
2. Talk to your Accountant
You need to understand the tax implications of buying an investment property and your accountant is the best person to speak to about this. Ask them to clarify the following:
- Negative gearing implications and depreciation allowances on new buildings. Your account will be able to advise if you are better off buying in a new or old building.
- If you are buying a property with someone else or in a trust/company name, ask your accountant whose name should be on the sale contract, as this may have impacts on any future tax benefits, land tax and stamp duty.
- How much they believe you or the trust/company can afford to spend each week on an investment mortgage and the tax impact on this amount.
- What paperwork/receipts you need to keep a record of.
3. Review Local Market Data
There are many resources you can use to gain access to market data for different regions across Australia. Online sources such as CoreLogic RP Data, Pricefinder, realestate.com.au, or Residex will help you understand different property markets across each state and territory. Additionally, most government websites provide community profiles that share information about council plans, development projects or building regulations that can help you understand the supply and demand of the area as well as offering data to refine your search.
From a local perspective, Lot 42 Real Estate can provide you with an in-depth local market report detailing growth rates, most traded and fastest selling areas, the top performing local suburbs and an overall snapshot of the house and unit sales showing the median sale prices, rental yield, days on market and more. Understanding the local market of where your investment is situated is very important, so make sure you contact Lot 42 Real Estate - They are your local investment property specialist, specialising in property management, and offering a qualified and knowledgeable team. Everything we do is focused on ensuring your asset receives the highest possible return on investment.
4. Get a Loan Pre-Approval
Getting a pre-approval is an important step in ensuring you are prepared to buy the right property as soon as it becomes available. A pre-approved home loan is a green light for buying an investment property. It gives you a realistic idea of your borrowing capacity and ensures you have a price range ceiling. Without a pre-approval you can’t confidently put a bid in at auction or make an offer on a property.
5. Get a Feel for the Neighbourhood
Through carrying out rigorous research to become a seasoned investor nothing can boost your proficiency more than experience and one hands-on way you can get this is by visiting as many properties as possible within the local area you are considering purchasing an investment in. This enables you to be able to compare the properties in both condition and price factor, and helps you to be able to spot a ‘bargain’ - and a ‘rip-off’.
It is also a good idea to spend time in the local area you are looking to invest in, speak to local business owners and neighbours, ask them what it is about the area that they like, how long they have been in the area for, and if they have any negative experiences in the neighbourhood, or if they know of any planned developments, join local social media groups and join in on discussions regarding the neighbourhood, generally this is the best way to gather knowledge and experience on what potential tenants are looking for when moving to this area.
6. Be Clear about the Type of Property you want
Ensure you decide whether you want to invest in an apartment or a house before you begin your search. There are pros and cons for both options and these may vary depending on the area. You also need to consider if you wish to buy a new or older style property.
If you are buying a new property off the plan, you are able to lock in today’s price for a property that may not be completed for another year or two. What’s more, until the property is complete you won’t have to make any mortgage payments - the only commitment is a deposit. The downside is that there is no guarantee the value of the property will rise between purchase and completion.
The other option is to buy an existing property. One of the key benefits of this option is that you may have more scope to negotiate on the price depending on the current market conditions. Plus, there is often the capacity to add value to older properties by making your own improvements, which in turn may increase the rental return it attracts.
7. Location, Location, Location
A golden rule of a solid investment property is to choose a property close to local amenities: transport, supermarkets, schools and hospitals - the more nearby the property is to facilities the better. Also consider the crime rate, walkability scores, any future amenities planned and the historic charm of the property or the area.
8. Think about your Ideal Tenants
Carefully consider the type of tenant you want to attract before deciding what and where to buy. For example, if you’re looking to attract executive tenants a property in an urban location near transport, cafes, business and commercial premises is highly likely to appeal to them.
If you want to attract a family, consider looking for properties that have an outdoor space; deck or garden. Look for a place with extra space for the kids to play, one close to good schools, parks, transport, hospital and shops.
9. Keep some Cash on Hand
Successful investors keep a slush fund of cash on hand to ensure they are able to cover unexpected costs such as routine or emergency maintenance, rental voids and contingency for interest rate increases. Some experts suggest saving 9-10% of the gross rent return in a slush fund to ensure you are prepared for the unexpected.
10. Due Diligence
While you may be tempted to snap up a ‘bargain’ quickly, make sure you do your due-diligence on the property and don’t sign anything, including offers, sales contracts or any other pieces of paper given to you unless your solicitor or conveyancer has reviewed and approved the documents. Remember don’t get too emotional about an investment property purchase as you are buying for a return, not a home to live-in.
Investing can be difficult, stressful and overwhelming but with enough preparation, persistence and optimism you can achieve great results. At Lot 42 Real Estate, we understand that your investment property is a valuable asset requiring expert care and attention, and entrusting in us ensures you will receive the necessary experience and knowledge to provide you & your property with the comprehensive level of service required.
We’re here to help you build on your investment dreams, and look forward to being of service to you!