Many people do not consider investing in property, because they think that it is too risky, too hard, too complicated and many other reasons. The fact is this; it is easy, it is not complicated and what’s more, anyone can do it. All you need is the right information, a good strategy and a good mentor.
So here are a few helpful suggestions for you:
1. Why are you buying?
This might sound like a stupid question, but you need to think this through, because it has a major bearing on what you buy, where you buy, what name you buy it in and a few other factors.
I’ve found that while most property investors hope to one day replace their personal exertion income with cash from their investment properties, most don’t have a strategy to achieve their goal.
2. What to buy?
First thing to do is to work out what type of property you will need for your situation. This will depend on many factors; your reason, your price-point, your purpose and length of time etc.
Do you buy new or old. House or unit or townhouse or an apartment. Commercial property or retail property or Industrial property? This does depend on many factors.
If you are not sure, please give me a call or email me and we can analyse this very quickly and I can assist you with getting the right one.
3. Where to buy?
Do not look for ‘hot spots.’ If you do you are dicing with danger for the simple reason that today’s hotspot might be tomorrows cold spot. Do your research around where you live and get to know the area. There is nothing better than being able to drive past your investment property on a regular basis, just to see how it is doing.
If it is too expensive around where you live, then look for the areas that the government has designated as Regional Centres where money for new infrastructure is being spent and it is well serviced by transport, shops and schools.
I am not a great fan of buying in regional centres. History has shown that the capital growth of city based properties does exceed regional properties and although regional might give you a better rental return, when you add in the capital gain, city based properties win every time. And if you have to sell for any reason, they sell quicker in Melbourne.
As far as deciding where to buy; this is easy. ABS figures show that Melbourne recorded the biggest population growth rate of any capital city in Australia last financial year, with its population increasing by 2.1 per cent. Why would you not invest in Melbourne, when it is going to be the largest city in the country.
4. Do not buy to negatively gear. I hear this so often that people want to buy an investment property, because they want a tax deduction. This is not a reason; it is just a very useful by-product of investing in a property and not the aim. Unless you are on a big wage it is not a reason.
That said, property does allow you many tax advantages, especially depreciation, but you do not buy it for that reason. You buy it to suit your plan for creating wealth and you choose the property accordingly.
5. What entity do you buy the property in? Your name? A Family Trust? A company? This might seem a difficult question, but once you know what the end game is, it is easy as picking up the phone and asking a good accountant and lawyer.
Or I can point you in the right direction, as I have a good team assisting me.
6. So just how many properties does it take to enable you to quit your day job and live comfortably?
This is a very interesting question and it depends vey much on what you want as an income when you quit working.
The sad fact is most people think they can retire on the pension and what they find is that they have to drop their standard of living quite considerably to manage. Is this what you want for yourself? I should think not!
From my research it appears that a minimum of around $80,000 per annum is what is required to live comfortably as long as you do have no debts to pay.
So do the maths. Let’s assume an interest rate of 3.5% paid on your savings. To achieve $80k per annum you will need $2,300,000 saved. That is after you have paid off your house. And then you have to keep pace with inflation. How does that sound? Does it make you stop and think? I hope so.
The fact is that property returns at least 3.5% per annum, so if you had three debt free properties to the value of around $1M each you would achieve that and what is great is that they keep pace with inflation. Just think about this; had you bought ten years ago you would have only paid $500,000 for each of them.
So I ask you this; would you like to start NOW! As they say; ‘better late than never.’
Till next time
Warm regards
Bertram
