The 10 Commandments Of Property Investing
By Chris Gray, Property Mentor
It never ceases to amaze me how few people have a
strategy in place for investing in property. This is a trait I have witnessed
in those just starting out in the market as well as industry veterans I
interview for ‘Your Money Your Call’ (Fridays on Sky News Business Channel).
When you consider that, for most people, property is the
single biggest asset they will purchase; it seems ludicrous to not have a firm
strategy in place for investing in it. Whether you are an experienced investor
or a novice looking to break into the market, my top ten rules can help you to
buy smarter and achieve better returns in the long term. These tips form the
backbone of my strategy for Empire clients and for my
property that’s attractive to tenants
Any property you purchase should be in reasonable
condition (or able to be upgraded for a reasonable price), have good sized
bedrooms, off-street parking and good positioning away from noise and main
roads. Look for something that suits the majority of tenants in the area to
ensure your property is always attractive to renters. A property that is always
tenanted means a stable income stream.
property that will grow in value
Properties in locations close to the CBD, leisure
facilities, schools, public transport and beaches (where possible) are more
likely to gain value in a good market and less likely to lose value in a down
3. Buy blue
If a property seems too cheap to be true – it probably
Cheap properties are cheap for a reason,
and that reason is the lack of demand for properties combined with an
oversupply in the area. In general, it is worth paying market value for a good
property in a top suburb rather than a property that is cheap because no one
really wants it.
instant equity through simple renovations.
Quick, low-cost renovations such as a paint job,
re-carpeting, tidying the garden, painting the fence, installing new curtains or
blinds and replacing kitchen cupboard doors can have a significant impact on
the value of your home. A good rule of thumb is to aim to get back at
least $1.00 – $2.00 in value for every dollar you spend on renovations.
5. Create a
buffer by refinancing.
When your property has grown in value, it’s sensible to
create an emergency buffer zone by refinancing. This will ensure you can
continue to make mortgage repayments even if unforeseen expenses or loss of
income (such as losing your job) occur. Don’t find yourself in a forced-sale
position, as you won’t get the best price and you may have to pay capital gains
taxes and other expenses.
Hire a professional property manager to ensure you get
reliable tenants who pay a good market rent. Consider tying your existing
tenant down to a new 12-month agreement to help guarantee your rental income.
7. Get an
independent valuation before you buy.
Buyers can get emotionally involved when buying property,
causing them to pay more than the property is worthy. By investing a few
hundred dollars on an independent valuation, you can almost guarantee you will
never pay too much.
8. You don’t
have to sell to profit.
Don’t think you need to sell to realise capital growth
gained in a property. Selling a property incurs sales costs and taxes and,
often, re-buying costs. By refinancing you have access to profits made on the
property while holding on to your asset. This is similar to a reverse mortgage.
investing is all about time in the market.
Timing the market is for speculators not investors. If
you can afford to buy and hold on to your asset, the time is right to buy.
And my most important tip:
10. Build a
team of professional advisors.
You can’t do everything yourself. An initial outlay for
hiring professionals who are experts in their field can make a difference of
tens of thousands of dollars to your long term returns. As a starting point,
every investor should have an accountant, mortgage broker, financial advisor,
valuer, building inspector and managing agent. There are companies who will
organise all of this for you.
Source: Chris Gray, Property Mentor