The most successful property investors tend to have one thing in common: they know their limitations.
‘Some people might claim to have all the answers, but there really is no manual,’ says Kieran Clair, director of property public-relations consultancy Bricks & Mortar Media and a board member of the Property Investors Council of Australia (PICA).
Peter Koulizos, program director of the Master of Property at the University of Adelaide, adds: ‘You should always assume you have more to learn.’
In that spirit, here are four key pieces of advice to point you in the right direction.
1. Get educated
‘There is so much more free information and knowledge out there now than there was when I first started,’ says Ben Kingsley, managing director of Empower Wealth Advisory and chair of PICA. ‘So, read investment books, pick up magazines, listen to podcasts and watch YouTube videos.’
According to Koulizos, ‘You should also speak to experienced property investors about their experiences. Now, they might be hard to find in person, but there are plenty of online communities that would be happy to help you out.’
A word of warning, though. ‘You’re going to get overwhelmed with content and you will come across conflicting viewpoints,’ says Kingsley. That’s why he recommends a healthy dose of scepticism. ’Usually, if you’re careful, you can sort out the self-centred wannabes and their “too good to be true” claims from the sensible subject-matter experts.’
2. Don’t limit yourself to your own backyard
When you make your first property investment, it’s natural to want to stick close to where you live, says Kingsley. But doing so can be a mistake.
‘At the end of the day, investing is about getting sound returns and not all property markets are the same,’ he says. ‘You need to lift your eyes and consider borderless investment opportunities, because the investment returns could be better for you.
‘If this makes you nervous, it shouldn’t stop you. You should get advice from a professional to help you identify an opportunity and help you buy it.’
Kingsley says when he started investing 25 years ago, he didn’t look beyond known locations. ‘That was a mistake,’ he says. ‘If I knew then what I know now, that first investment could have created hundreds of thousands of dollars in additional wealth.’
3. Be conservative with your expenditure
According to Clair, the most common mistake first-time investors make is spending more than they can afford. ‘Don’t shoot for the brass ring straight off,’ he advises. ‘And try not to borrow the maximum amount the bank will allow. Look for something that will be affordable, even if your circumstances change.’
Clair says becoming confident in owning an investment property can take several years. During that time, it isn’t wise to put yourself under financial strain.
‘The hardest part of buying a property is the first three years, when you’re really getting used to the idea of having to service a loan and deal with maintenance expenses and tenants and property managers,’ he says. ‘Once you get past that, and you know what to expect, you have an edge.’
4. Don’t make the decision alone
Educating yourself is important, but so is seeking a second opinion – particularly if you’re a first-time investor.
‘Before you sign on the dotted line, speak to someone about the specific decision you’re about to make, and show them everything: photos, floor plans, the lot,’ says Koulizos. ‘The person you choose should know more about property than you do – whether it’s a professional who you have to pay, or your dad or your elder sister who already has a portfolio.’
Doing so won’t just improve your chances of making a good investment – it’ll calm your nerves, too.
‘It’s a scary thing to spend several hundred thousand dollars on your first investment property,’ says Koulizos, ‘and it generally will make you feel more comfortable if someone who knows what they’re talking about agrees with your decision.’
Attention: Investment is subject to DHA’s lease terms and conditions of sale. Investors retain some responsibilities and risks, i.e. rent, restoration and market fluctuations. Prospective investors should seek independent advice. See dha.gov.au/lookforward for relevant information.
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