First Time Property Investors: Tips for Rookies

Property investment is not for the faint-hearted, it is a big decision, and like all investment that involves significant amounts of capital outlay or borrowing; it is not without risk.  However, it is also one of the most solid and proven ways of growing your wealth, and generally involves less risk than the stock market and other capital ventures that can deliver strong returns in short periods of time.  A longer term, strategic outlook is critical…it is rare to make capital gain on property in a short period of time.

If you’ve been giving it some serious thought, it is important that you put the hard yards in via research, before you think about signing a contract and commencing your portfolio.

Knowledge is the key – you need to be able to identify what makes a good property investment and remove any emotion from the decision-making process.   Regardless of the well-meaning advice from family and friends, you must carry out extensive due diligence to ensure your venture into the world of property investing is a positive and a profitable one.

The four key factors to consider are:

  1. Capital Growth – your investment must have a proven history of above average appreciation due to the location and demand.
  2. Cash Flow – you have to manage this correctly with every investment, including getting the right tenants and rental income as well as creating a cashflow buffer and avoiding over-capitalising on a property you cannot afford.
  3. Tax benefits – while you should never invest solely for this reason, a good tax strategy can help you manage cashflow, decrease your tax obligations and increase your bottom line.
  4. Accelerated Growth – investing in a property that needs a bit of cosmetic TLC with minor renovations is a great way to jump a few rungs of the property ladder on your way to the top, particularly those in a future growth corridor or sought-after location.

It is also critical to be aware of the property cycles; when the market slows, this is generally when you can secure the best deal, with less competition from other buyers, the price is driven down.   During this COVID-19 crisis, the market has slowed somewhat, particularly in the capital cities, and prices have fallen; keep a very close eye on this unfolding situation, as it could prove a very savvy time to purchase an investment property.

Next week…we’ll explore this a little further and talk about location and professional advice.

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