How to Invest in Property Without Risking Your Life Savings

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Let me guess.

You’d love to jump on the property investment bandwagon and make some money?

Everywhere you turn, you hear of people who’ve made huge profits from property. You’ve been glued to realestate.com.au and receive daily feeds from the local real estate agent.

After all, owning property is the great Australian dream.

But, you’re terrified you’ll screw it up and lose money.

Property investment involves some pretty big numbers – probably more than you’ve got stockpiled in your trusty investment account.

But if you’ve got a stable job and a few dollars saved, you can make money from property investment and create wealth for your future. You just need to follow a sensible plan.

There are no crazy stunts or outlandish strategic manoeuvres here. Just rock-solid, sensible advice to help you take confident, knowledgeable first steps.

Ready? Let’s dive in.

Why Buying an Investment Property is a Good Financial Strategy

  • Capital growth. When your property value increases with time, you’ll be able to leverage the capital growth to maximise other investment strategies.
  • Safer investment than shares. The property market is less volatile than other investment options such as shares and it generally maintains value better than other assets.
  • Better control. Property is tangible, and because of that, it’s an easier asset to manage. You won’t need to decipher the complex financial jargon and pages of numbers often presented with other types of investment options.
  • Tax benefits. You’ll be able to reduce you tax obligations on rental income and capital gains, which will increase your return on investment.

11 Easy Steps to Getting Started

1. Be prepared

  • Talk to people; read articles and books; research the market.
  • Visit local real estate agents and ask for recent sales prices for properties.
  • Discuss pricing trends and ask about rental returns.
  • Look for areas with high rental vacancy rates as these may indicate issues of oversupply or changes to zoning.
  • Write it all down.
  • 2. Assess your finances

    List assets, savings, salary and all other income sources. Save the list somewhere.

    3. Set goals

    Write down your goals. Make them measurable and exact. For example, to own two new, income-generating rental properties within three years. Use numbers, locations, percentages and dates in your goals.

    4. Stare risk in the face

    Be honest with yourself and rate your risk profile on a scale of one to ten. One being totally risk adverse and would rather keep your riches stashed in your mattress. Ten being happy with high-risk, high-return, you-only-live-once type arrangements. Write it down.

    5. Understand the pitfalls

    Good and bad always go hand in hand. Stay ahead of the game by understanding and planning for some of the pitfalls of property investment.

  • High entry costs. Clarify every cost you’ll be liable for such as legal fees, stamp duty, and real estate costs.
  • Liquidity. Property sales take time. You can’t sell an investment property to make a quick dollar if something urgent pops up. You’ll need a backup fund for emergencies.
  • Rent free periods. Rental properties rarely run at 100% occupancy, therefore, expect periods of time with no rental income between tenants.
  • Bad tenants. Not all tenants are good tenants. Issues such as unpaid rent and damage are a couple of the pitfalls of renting your investment property.
  • 6. Budget

    Record your expenses and cash flow – what, where and when every dollar goes in or out of your accounts. There are plenty of free budgeting tools and software available. Try the Australian Government’s budget planner or Google to find other options.

    7. Plan your approach

    How and when will you make your first purchase? List desired areas, price range and minimum property specifications that a property must meet to make the short list.

    8. Recruit an independent opinion

    Before you sign on the dotted line, speak to an industry expert, real estate agent, or financial adviser to discuss your intention to buy. Their role is to be your voice of reason and if required, your devil’s advocate.

    9. Use your head

    Leave your emotions at home and keep your plan firmly in your hand as you conduct final property viewings. Take a level-headed friend if that will help.

    10. Keep your eye on the end-goal

    Understand that the market moves up and down, but in the long-term, it trends upwards. Remain focused on your goals and don’t let short-term challenges or downturns in the market cause you to throw in the towel, sell up and admit defeat.

    11. Implement risk management strategies

    Speak to a financial adviser and discuss strategies to insulate your property portfolio from interest rate hikes, income loss, potential tenant lawsuits, failed business ventures, relationship breakdowns or estate disputes.

    You know you should take the plunge and diversify your assets by investing in property. Your future wealth depends on action, not inaction.

    Making the right decision about where, when and how much to invest in a property can seem overwhelming and fraught with danger. But with a little planning and research, it’s not as difficult as it may seem.

    It’s a proven path to making money for those who act.

    So act now. Review the 11 easy steps to get started and start planning today.

    Taxeffective White

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