The burning question every property investor wants answered
If you were relatively new to the investing space you would be forgiven for feeling overwhelmed by the options out there.
Not only what type of property to seek out but also the location, the merits for and against an area’s growth predictions and the tenants you will attract.
It can be a tough field to navigate.
Make one wrong move and you could be setting yourself back years and thousands of dollars on your path to financial freedom. It could literally be the difference between choosing when to retire and being forced to continue working well into the twilight years to make ends meet.
Sounds daunting, right?
As a Buyer’s Agent I have encountered every doubt, concern, anxiety and question from my clients. Every now and then I unearth something quirky I have not heard before but as humans we are all tied to the same desires – the need for shelter, safety and certainty always featuring highly.
Get the strategy wrong and you dive into uncertainty, which compromises your sense of safety. It opens you up to financial vulnerability, sleepless nights and unexpected pressures you simply didn’t sign up to.
So how do you know what strategy is right, for you?
Just because someone you know has had great success with Airbnb’ing a granny flat does not mean you would be suited to that formula.
Considerations you need to look at have to reflect YOU in the equation.
Here are some fundamental points to consider:
Your age and stage of life
If you have 2-month-old twins but love renovating and getting deep into a project you may need to rethink how you approach this strategy in the future (well, at least for a couple of years).
Sustained sleepness nights and newborns won’t make for a great reno project foundation.
If you start to outsource the work you will need to factor the cost of labour into your margins, which could erode profit.
Be sure to work with a strategy that makes sense for your lifestyle at the time of purchasing.
Like, duh! Getting your finances in order and being pre-approved is essential to the buying process but what if you are planning to study part-time in the future, or travel, or take maternity leave?
This is the time you need to look at your strategy as it stands today, and as it will stand in 5-years from now.
Can you afford the maintenance costs of an older home, or even prop up a negatively geared property portfolio in the coming years?
This is where you need to seriously look at yourself and your partner’s ability to sleep at night when there is uncertainty on the table.
Some property strategies are highly speculative; some require your regular input (like running a student boarding house).
Do you like to be actively involved or are you a ‘set and forget’ type of investor.
If you love the idea of a renovation project but have never picked up a power tool or a paintbrush then you might need to invest some time into educating yourself in this space.
If numbers are not your thing and you don’t understand tax law – you need to build a team of licensed professionals around you who know better!
It is okay to do what suits you and not take the questionable advice that is handed to you at every turn by well meaning friends, colleagues, family, the butcher and your hairdresser.
When it comes to property – EVERYBODY – has an opinion!
We started to implement strategy sessions into our business and ongoing mentoring when clients were coming to us with a clear sense of overwhelm.
When we look at investing for clients we look at the overall picture from a very holistic viewpoint:
- Who are the investors, what is their risk assessment outcome?
- What are their financial goals?
- What is life for our client like today, what are their plans or intentions for the future?
- Are they going into this project with their last cent or do they have capacity to still live comfortably?
- Do they have an exit strategy?
Investing is not a one-size fits all strategy. Guess who knows you better than anyone else?
Approach with caution, be realistic about your skill set and knowledge, and surround yourself with a team of experts.
Start with a brilliant broker and accountant.
And then simply start!
Jo Vadillo is the owner and Director of Advocate Property Services Pty Ltd. She works with investors and homeowners to source new and existing properties that meet the best investment credentials to build a prosperous property portfolio for their clients.
Jo also runs Property Women, an organisation aimed to educate women on their journey to property success. She is a sought after speaker in the property space and regular media contributor, and author.