First Time Property Investors: Tips for Rookies – Part II

Last week we spoke about four key factors to consider when purchasing an investment property: capital growth, cash flow, tax benefits, and accelerated growth.    This week we will talk about location and professional advice.

Location

You are all familiar with the real estate mantra ‘location, location, location’.  Location is a key factor that can make or break a property investment.

Question: How do you get it right?

Answer:  Research.

You need to find out about the historical movements of the local market, the primary demographic who lives there and ask yourself, is there more demand from homebuyers than there are properties for sale?

Find out what future infrastructure/capital works are forecast for the area of interest – major public and private investment can make a significant difference to the outlook of an area; a depressed area can be rejuvenated with an injection of funds and its popularity can surge as a result.

When demand outweighs supply, you have the prospect of good long-term growth, so if you buy in well-established, inner city areas where there’s very little capacity to create any new land and housing, you’re on to a potential winner.

Educate yourself by reading, attending seminars, and engaging the services of an independent property strategist who knows the area you are considering thoroughly, if you want to save yourself some time.

Professional Advice

Talk to a professional finance broker regarding your financial strategy.  Without a well-rounded understanding of how to maximise your borrowing power, use equity as a leverage to build your portfolio and maintain a financial buffer to see you through the difficult times that we all ultimately face, you are setting yourself up to fail financially.

A lot of people think they can simply draw the equity from their own home and sink it into an investment property, but have you considered how the bank will look upon your loan application?  What is your credit history like?  Can you service the debt you intend to take on?

The above questions are critical, and a finance broker should be able to provide sound advice covering all aspects of any property investment, from the benefits to the pitfalls, so you are better equipped to make an informed decision.