7 Step Property Investment Strategy You Can Use Right Now
Property is one of the best investments you can make — now more so than ever. Driven by low supply, high demand, and some of the best interest rates in history, the Australian property market has continued to rise week on week, month on month, reaching record highs even during the midst of a pandemic! As an eagle-eyed investor, this is the sort of thing that should be getting your attention.
Why Property Makes A Great Investment?
There are many reasons why property continues to be the investment for savvy investors, but two big reasons are:
- Guaranteed income - Rent is a contractually enforced return on your investment. Dividends up and change at the drop of a hat, but rent is locked in for the specified term. This means, for once, you can count your chickens before they hatch and plan out the best way to spend your money.
- It’s recession-proof - Unlike other investments, people will always need a place to live. If you buy the right property, you’ll find that not only does your property not crash during recessions, but its value might even grow! This is currently the case, as we are seeing housing prices skyrocket as Australia solidifies itself as one of the most attractive countries to live in.
Strategy Is Important
When it comes to the property market, a failure to plan is planning to fail. It’s not as simple as finding a pretty property, buying it and then making massive returns. Without the proper strategy, you will find yourself making easily avoidable mistakes that could cost you serious amounts of money and time.
That’s why we’re here to help you out with our 7 step strategy for property investment, and the best part? You can start applying it right now!
1. Plan Out Your Goals
Ask yourself, what is your current financial situation and how do you want investing in real estate to change that? For some people, they want a boost to their passive income. A steady set and forget rental income that will pay for itself without much effort. For others, they want an unloved property that they can renovate for a big payday.
Once you’ve decided on the why, it’s time to work out the what. Are you looking for a short term holiday rental that you might occasionally use yourself? Or maybe you’d prefer a commercial property with a business tenant? Different uses come with different pros and cons, do your research and when in doubt, speak to a property professional.
2. Search For Properties That Meet Your Criteria
Thanks to that previous planning, Instead of aimlessly searching, you now know exactly what you're looking for and can quickly filter out the properties that don’t fit your criteria. Be patient and stick to your plan. Don’t get desperate and buy something that doesn’t fit for you, fight the FOMO and you’ll be rewarded.
So where do you find these properties? The obvious place to start is with online property listings such as realestate.com and Domain. Here you can quickly apply search filters to make sure you’re only seeing properties that are a match for you. These sites also offer email and phone notifications of new listings which fit your criteria. We recommend signing up for these services, as the perfect property won’t be on the market for long.
Another avenue for property hunting is through connecting with local real estate agents. Often they will have properties that are yet to go on the market, and will be more than happy to give you the inside scoop.
It also pays to keep an eye on the classified Ads or pages, such as For Sale By Owner, Agent-in-A-Box, Gumtree, for sellers looking to skip the middleman and sell without paying an agent’s commission. However, be prepared to do a bit of extra due diligence if you go down this avenue.
3. Inspect The Properties And Select The Best
Now is the fun (but time-intensive) part. You need to get out there and do the fieldwork. There are 3 main things to pay attention to:
The Building Itself
Building and pest inspections are non-negotiable. Do not be pressured into “sweetening the deal” by removing this clause as you will only be putting yourself at risk of losing hundreds of thousands of dollars. Remember, anything in this report can also be used as potential negotiating room for the sale price, or at the very least allow you to plan for future expenses. Don’t pay too much attention to minor damage and wear and tear, but unless you have the time and money, anything structural is generally a big red flag. Keep your eye out for properties that have good bones but plenty of opportunities to add value, e.g outdated kitchen/bathroom or potential to subdivide.
The Area
One of the biggest turn-offs for renters and investors is crime rates. Other things to take into consideration are traffic noise, proximity to schools and shops, as well as the ever-increasing access to lifestyle opportunities. These are things like proximity to the ocean, parklands or recreational facilities. With working from home increasing in popularity, we are seeing a strong desire to be able to live work and play all in the same locale.
Demand
It doesn’t matter if you have the most beautiful home in the area, if there is no demand, it’s a wasted investment. Current demand and future demand should both be investigated. Look for areas where the household incomes are rising (normally a sign of gentrification) and research proposed developments in the area. Public transport, health hubs, future developments are all good indicators of future demand. While statistics such as vacancy rates give a picture of the current demand.
4. Negotiate with the seller
Depending on the market, sellers will be more or less inclined to negotiate. Currently, demand is high and supply is low, meaning negotiations will be slim. As a buyer, you need to be prepared to act quickly, and potentially even pay above the listing price. This is why it’s vital to have your pre-approval/finance sorted beforehand so you know the maximum you can comfortably afford.
It’s also important you get familiar with bidding at an auction. In these competitive markets, auctions are increasingly becoming the preferred method of sale for many sellers. If you don’t think you’ll be able to keep your emotions in check, get a trusted friend or family member to bid on your behalf. There is no room for emotional attachment if you are after a great return.
5. Buy The Property + Make Any Updates
Once the property is yours, it’s time to get to working adding that value. You don’t need to go too crazy, many cheap and easy updates can have a big impact on the amount you can rent the property for.
First thing to look into is a fresh coat of paint. Sparkling white walls are a non-offensive and extremely easy way to breathe life back into an older property.
Then it’s time to turn your attention to the two rooms which can make or break your property, the kitchen and bathroom.
If you can’t afford a full kitchen remodel, consider updating the fittings and all the fixtures to modern styles. Matte black or brass are current styles favourites. The same goes for the bathroom. Consider painting outdated tiles and updating the vanity as the absolute bare minimum.
Regarding the rest of the property, its fairly straight forward. If you have old carpet, rip it up and either polish the floorboards or install tenant friendly laminate flooring. Modern appliances are a must if you are renting out the property for short stays, otherwise, leave it bare is generally best practice.
6. Organise Tenants (A Property Manager Can Help)
Just like when you were looking for a property, when searching for a tenant it’s important to be patient. The perfect tenant is worth waiting for. This is where a great property manager is worth their weight in gold. They deal with all tenant applications, reference checks, assess market prices and make sure your property is in good hands.
When pricing your property, without a property manager, it’s important to do your research. Beware of overpricing. This will significantly lower your tenant pool, and it’s better to have a great tenant paying a little less.
7. Evaluate Every 6 Months And Continue To Grow
Remember that planning you did way back at the start of your journey? Now is the time to take a step back and examine how things are tracking. How is the property going? How are the tenants? Check-in with your goals are you on track how could you improve? Is there new demand from a higher income market? Would you be better off doing more improvements and upping rent? Switch from long to short term? Be adaptable and adjust to the market. This is a great time to check in with your property manager and get their opinion. The beauty of property investment, is you control your property.
Conclusion
Property investment can be a lot of time and effort, but the reward is definitely there. If you want to invest but don’t have the time for all this research, don’t worry, there are alternatives.
Just be wary, as most Buyer’s agents and property “experts” only provide a buying service. At Mantra Wealth however, we take our clients through the full cycle of strategy, advisory and depending on the client, acquiring unique properties with future development potential (as well as helping them implement that development).
Additionally, we are active investors. Unlike many property professionals, we have a sizeable portfolio and actively use the strategies that we recommend to clients. We stand by our process and are personally invested in your results
If you want to review your property portfolio and create an actionable plan for success, send us a message. We’re here to help you.