Many of those just commencing their journey in investment property fail to fully realise the necessity of managing risk, managing risk is one of the key reasons so many property investors are forced to sell before they intend to, frequently at a loss after selling costs are taken into account.
So having the right tools, knowledge and related industry professionals on your team are the most important resources to obtain as you begin your journey in property investment.
Before you commence your quest to achieve investment property success, you need to select a blueprint that best suits your present situation and why you want to invest in real estate, is it;
- To develop a new income stream to live off
- To create long-term capital growth to help fund your retirement
- To achieve comparatively quick profits through renovating properties and selling them
Get Up to speed with the latest online Apps and Tools
Identify the online apps and tools that will add value to either your property investing knowledge, to your portfolio, or both. There are so many online sites available to investors. Consider tools like DSR walk score calculators, RP Data, loan repayment and stamp duty calculators etc.
Remember who pays the agent
A real estate agents sole role is to achieve the optimum price for the seller and will use all their powers of persuasion to get you to buy the property you are looking at. They will magnify the positives, mitigate the negatives and do their utmost to get you to purchase the property at the highest price possible.
Take your time
Even if you are looking for a quick purchase keep this to yourself. If you tell the agent you are in a rush, it will enhance the vendor’s negotiating position. – You would be happy for a quick settlement – But getting value and being on or under your purchase budget is your most important consideration
Be information rich
Information is also a great weapon to have up your sleeve when negotiating a real estate deal. Have you spent some time collecting relevant information about the property? For example:
- The quality of the location
- Problems and defects with the property
- Any issues in the surrounding area that may affect your property
- Ups and downs of the local economic environment.
What better way to convince a seller to lower their price than to remind them of the little things you have noticed that is wrong with their property. Use the power of positive and negative information to assist you during the negotiation process.
Ask lots of questions
If you walk in the door of your next investment property and it meets all your requirements, stay patient. Never let the agent know that your objective is to purchase, at this early stage. Rather, you need to ask questions that will prepare the ground for future negotiations. For example;
- Why is the property being sold?
- How many people have been through it?
- How long has it been on the market?
- Has it been to auction and been passed in?
- Has the price been reduced since it was listed for sale?
- Are there any known defects about the property that the agent or vendor is aware of?
Do your groundwork and conduct thorough due diligence
When you think you are ready to make an offer, pause and consider your position. At the very least, you need to know;
- How long the property has been on the market for
- Its on-the-market history; any changes in advertised price since it was placed on the market
- Its sales history i.e how much the previous owners bought it for
- The median sale price and historical capital growth rates of the location
- How much comparable properties are selling for (and renting for if you plan to let it as an investment property)
- If you are planning on renovating the property then selling, how many similar properties in the area are for sale that have the features you intend to add
- An estimated market value based on all the above
Network online with like-minded people
Don’t treat them as competitors, but rather allies. In this social media age there is no excuse not to be able to find like-minded people you can learn from. You may be able to engage with experienced investors who may have a better understanding of a particular concept or a more specific property investing topic. Linked In offers excellent community groups with real-time conversations happening . Twitter is intelligent too; once you establish a group of investors and influential property people you follow (and a few follow back), Twitter’s engine will go out and find more of those types of people for you.
Attend events and seminars
Don’t just rely on online communities; look at attending events such as the Home Buyer and Investor Show, and also local property investment shows and seminars. Just be able to discern between an unbiased/3rd party seminar on a topic; and a property development sales agent trying to sell their stock.
Have your Investment Property finances ready
Finally and most importantly, have your finances ready, for many investors raising capital and sourcing loans is their major roadblock to success. Determining the right financier is all about selecting someone with proven experience in property investment. When you start out in property investment, you will most likely need to apply for a mortgage and this can be done by applying directly through a bank or consulting a mortgage broker with property investment experience, by utilising the skills of an experienced mortgage broker to help hunt down the best finance options possible, over time, will save you money and potentially increase your borrowing capacity.
Every lender treats the assessment of your investment property loan differently, from the percentage of the rent allowed, to either accepting negative gearing or even allowing you to borrow more if choosing a fixed interest rate. A strong and continuing relationship with your broker of choice is key to your success as a property investor, but be sure to find a mortgage broker who is not attached to a real estate or property development sales office.