Setting property investment goals

Setting property investment goals is a key contributor to being a successful property investor. In this market insight we share some tips to help you establish goals that will help you advance into your investment journey.

What is your motive or plan behind investing in property

When investing into any form of investment, you need to understand what your motive is. Of course, we all want to make money, who doesn’t. However, you need to further consider other areas behind investing. Buying direct shares are different to buying property. A property is a larger commitment. You will need to spend more to get one, while you may need a loan to acquire it.

• Before investing in property are you looking to generate a regular income stream through monthly rent?
• Are you wanting to achieve capital growth? Is this in the short term or long term?
• Do you want to borrow to invest? Are you aware that lending money magnifies your gains and/or losses?
• Do you have additional income to cover any shortfall between the property’s income and expenses?
• Are you wanting to take advantage of the tax benefits?

Whatever the reason, spend time figuring out your objectives and ascertain if they can be achieved. Writing down your investment goals and committing will ensure you are investing for the right reasons.

What is your time frame?

It would stand for reason that any investment strategy should generally be approached over the long term, however there may be many reasons why you want to invest shorter term. In making a good investment decision, you need to be honest with yourself and establish a time frame. This timeframe can be set for different reasons or events.

• How long do you want to invest?
• If you are borrowing to invest, how long will it take to eliminate the mortgage?
• If the property performs above market, will you continue to keep it or sell it off?
• If the property performs bad, does your time frame change?

When establishing a time frame, it will help you further understand your risk tolerance and what risk you willing to take. This is one of the most important investment goals to consider.

Understand what you can afford

Property investment is exciting in many ways. Before you start your property research, its very important to learn what you can afford. If something doesn’t going exactly to plan, you want a contingency plan to ensure you don’t lose the property in the future. Learning the loan repayment is the largest expense in keeping a property, but you have other factors to consider:

• Loan repayments
• Owners corporation fees
• Building insurance
• Council rates
• Water rates
• Landlord cover
• Property maintenance

Establish a personal budget to discover what you can afford and what you’re willing to contribute to investing. Identify what the property will costs to keep and what it could cost in the event you lose your renter. If you prove to yourself that your cash flow will meet the necessary costs, you’ll be buying with more peace of mind.

Employ a property manager

Not all property managers are equal. There can be a significant difference between a very good property manager and one that is average at best. A property manager will go a long way to increasing your investment returns. They are the perfect intermediate between yourself (rental providers) and the renter. They understand the laws and legal rights of all parties, making your investment opportunity reach its peak performance. They do cost you ongoing fees, so its important you do your due diligence first.

Here is a list of services a good property manager will provide:

• Establishing a marketing campaign
• Sourcing a renter
• Interviewing a renter
• Collecting rent
• Conducting inspections
• Assisting in any property maintenance issues

There are costs associated to sourcing a renter, this should also be taken into account when assessing what you can afford:

• Leasing fees (the cost to find a renter)
• Management fees
• Advertising costs
• Renewal leasing fees
• Administration or sundry costs

In summary

Property investment is known to be one of the most financially rewarding experiences. As it comes with risk and a large commitment setting property investment goals is an important way to commence the process. You’ll also need some trusted partners to help you make the best decision including mortgage brokers, accountants, property advisers and solicitors. Having a team of professional will reduce your investment risk while make the experience enjoyable.