Investmark Make your mark through property 10 RISKS FIRST TIME PROPERTY INVESTORS NEED TO OVERCOME To help you navigate the investment process, our FREE ebook series has been developed to provide you with everything you need when starting out or continuing with property investment. With the help of various tips and checklists, these useful guides will help you to secure the right investment property.
The information in this ebook is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser. No material contained within this ebook should be construed or relied upon as providing recommendations in relation to any financial product. 10 RISKS FIRST TIME PROPERTY INVESTORS NEED TO OVERCOME 1
Table of Contents Cover Page 1 Table of Contents 2 Introduction, Analysis Paralysis and The Markets 3 Population, What Is Your Why? and Asset Classes 4 Asset Classes, Approach and Successful Investing 5 Logic Over Emotion and Hold Strategies 6 Avoid DIY 7 10 RISKS FIRST TIME PROPERTY INVESTORS NEED TO OVERCOME 2
Property can be a prosperous experience for you and your loved ones to benefit from for years to come, or it can put your life on hold, holding back your every success. There is much discussion around the property market and what the future holds. Government regulation surrounding negative gearing has been a talking point in previous times and the RBA and major banks still play a major role in the affordability of the market for many first timers. This e book will provide you with the insight and foresight to initiate your property investment portfolio without the risk that other first time property investors undergo. You will be the standout among your peers and, to be ethically correct, you should probably share this with them so that you can assist them to be as successful as you will be. 1. The first risk to avoid in property investment is overanalyzing. Yes, property is an investment class and yes it should be critically analysed to determine whether it meets your long term wealth requirements, but don t let this place you under what we call analysis paralysis. Many first time property investors think things through until they think it inside out! The problem we face here is missing the macro perspective in a micro market. At a macro-economic perspective we view the nations economic performance from a birds eye view. It is then our objective as property investors to seek out the opportunities in the micro-economic markets within. Which states, city s, suburbs and houses have the strongest commercial potential within any given national market. Remember to think like a mature investor, not a first timer. Bring that cool calm and collected approach that welcomes logical sense and confidence to all property investment decisions. 2. After our birds-eye view, we should have identified the heated markets and the cooler markets. As a first time property investor we want to position ourselves in a market that is going to provide us with strong growth in the short to medium term. This isn t as easy as it sounds, but it s not as hard as it sounds either. Basically what you are seeking is an area that hasn t recently undergone consecutive years of high growth due to some short-range factors. As you will see when you look more closely at the market, at any one time there are certain areas doing well and certain areas ready to slow down. Underperforming or high potential growth markets are what we re after. These markets have long term projects planned for them and have both private and government involvement in the developments. This ensures security through government funds and clear commercial sense as we see private investors allocate their funds within the area also. 10 RISKS FIRST TIME PROPERTY INVESTORS NEED TO OVERCOME 3
3. Let s dig a little deeper into the markets and tackle the next big risk population movements. Some areas attract population seasonally, some areas attract it for the long term and others fit somewhere in between. Places that you should avoid are those with seasonal population movements. These are generally the locations we deem as tourist hot spots. They may see unexpected short term gains, but if you look closely, this will generally be tied to the success of the Aussie dollar and the perception of the international market that Australia is cheap. 4. After all of that time spent in research mode it s time to get back to the real reason as to why you want to invest in property. Is it the tax benefits to better position your income? Is it the wealth accumulation via capital growth? Is it the positive, passive income thanks to well-positioned rental yields as a result of your dubious research? What is it? It could be all of these reasons and more. One thing is for sure, you must realise where property fits into the strategy and why you want property in the first place. Those who buy one property and don t progress any further from that property often don t have a clear strategy and reason for investing in the first place. 5. In your selection process you should also be comparing other types of asset classes. There are many asset classes that inexperienced or first time investors have access to in today s day and age. With the continual exponential progression of online trading platforms you could now invest in just about anything from your grandmothers knitted sweaters to Kim Jong Un s stockpile of warheads. Whatever asset class you should choose, be that of the more traditional, shares, bonds, gold or even a term deposit, the same principles should still apply. Does it provide some form of short term or long term positive return? Does it fit in with my taxation goals? Can I afford to maintain this investment over time? And will it provide a suitable nest egg in retirement? With uncertainty rocking the entire world this past decade, all of these questions do require some time for well thought out answers. In all honesty, a balanced portfolio is always going to provide the safest option if you are looking for a diversified application of your funds. On the other hand, we have seen many balanced or diversified funds perform extremely poorly since around 2009. This has seen many investors select one asset class and MASTER it. 10 RISKS FIRST TIME PROPERTY INVESTORS NEED TO OVERCOME 4
6. The focused approach to investing mastery is one taken by some of the worlds most famous investors. Guys like your Warren Buffets, Bill Gates and Steve Jobs have all been famously quoted as referring to focus as their number one key to success. Doing one thing, and doing it extremely well. This same principle can, and should, be applied to your investing principles. Many first time investors can stumble by trying to diversify all of their funds too early on and not achieving success in any asset class; not just because there funds pool is limited, but because their focus has been stretched too thin over too many investments. A famous quote by Buffet goes something a little like this: "successful investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: you can't produce a baby in one month by getting nine women pregnant." 7. As Buffet clearly qualifies, successful investing takes time. Too often first time investors in any asset class will be scared off by one bad year or one forced sale. If we take a step back and realise that the majority of successful investors hold their assets for the test of time we can then begin to realise why things like 10 year moving averages exist and investments by the skilled are not judged on yesterdays movement. Assets are only as good as their final value or sale price; Everything else in between really doesn t matter all that much. So don t sell your property in the middle of a recession! Don t sell it at any period of time where it is not in your best interests. If you ve done your research correctly, and it has not yet realised the sorts of financial gains you believed it was worth when you initially purchased it, either seek professional advice, or hold in there. 8. Buy with your head, not your heart. Now I know that we have spoken about analysis paralysis and yes that does stem from the head not the heart, BUT the heart should only ever be involved in non-significant financial decisions. Even your first home should be purchased keeping in mind it s future financial characteristics. If your home is your first property investment then yes, you should have your financial hat on the day you sign the dotted line. The reason being that this is now, more than likely, the most significant asset base you ve come to own to this day unless of course you re one of the more fortunate trust fund babies. Believe it or not, the future, to an extent, does rely on the financial performance of your home. If you d like to jeopardise your financial future by living next door to mum and dad in the country side of ye old folk town, be my guest. However if you are someone craving to set up their financial future with a smart first home purchase then we recommend scoping out an area where the population exceeds 100,000 and there is real potential for future growth. 10 RISKS FIRST TIME PROPERTY INVESTORS NEED TO OVERCOME 5
9. Are you going to buy and hold or try and make a quick buck? Generally we see those trying to make a quick buck buy older houses in the more established areas young couples with some time on their hands on the weekend to knock down some walls and re invigorate the place. 9 months down the track they flog it off and hope for the best. This has worked for many, but not all. If you don t have the skill set to go forth and complete a renovation on your own there are other options available to you. The cost to renovate with professionals can sometimes be more than what its worth if you are looking for a quick buck. For this reason, new property can be an attractive option for first timers and experienced investors alike. New property is accessible, generally affordable, it does require a little more time, but can provide incentives for those who are willing to wait. In the early days, new properties can experience blazing hot capital growth. This occurs during the construction stage as a result of: Surrounding property prices increasing A completed house and land package is clearly worth more than a patch of dirt and a pile of bricks. 10. And finally, the last mistake you want to avoid as a first timer is the DIY approach. It may seem like you are doing yourself a favor in the long term by going at it alone in the early days, however, there s plenty of time for that later on. To ensure the long term success of your portfolio it is recommended to seek advice. At a minimum we would recommend: 1. A finance broker 2. A research analyst 3. A property manager 4. An accountant 5. A financial planner 6. A tax depreciation professional And believe it or not, a lot of the time you will get these services for free, especially if you are a first time client. These professionals have successfully navigated first timers just like you in the direction of success and financial freedom and saved many pointless and costly mistakes along the way. 10 RISKS FIRST TIME PROPERTY INVESTORS NEED TO OVERCOME 6
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***BONUS*** INFO-GRAPHIC EMPLOYMENT GROWTH Is the region surrounded by major employment nodes and what is the forecast jobs growth? RESIDENTIAL GROWTH What has the median sale price for houses in the catchment grown by as a percentage over the last decade. 04 03 02 INFRASTRUCTURE INVESTMENT Is the region postioned to significantly benefit from recent infrastructure initiatives? 01 STRATEGIC LOCATION Is the area positioned as a vibrant retail and commercial city or satelite city with easy access to the CBD? ACQUIRE SMART Use a professional research and acquisition partner to secure a packaged, fixed price solution. 05 ALIGN WITH YOUR OWN STRATEGY From finace to affordability, your circumstance now and in the future - make sure the property purchase is in alignmemt with these. 06 6 RESEARCH TIPS to start your property selection process the right way. When starting out on the path to property investment, most people are unsure where to start, what needs to be done forst and what are the most important things to focus on. Investmark s FREE ebook series helps to clear a path through the mountain of information out there and provides some valuable hints, tips and guides to get your started the right way. At Investmark Your Success in Property Comes First.