You’re starting out on your investment journey and the excitement is building, it can be tempting to dive in, however, there are many things to consider before investing. Developing and following a strategy is important to creating a successful investment. You must be ready for the dedication investing in property requires. Throughout our experience we have found there are many areas where new investors make recurring mistakes.
ResearchAs mentioned, research is a crucial part of making your property investment a success. There are many things to understand within property investment and by doing adequate research you equip yourself with knowledge and understanding surrounding many aspects of your investment. Before setting foot on the path of investment you should look into the strategies property investment offers. Many options are offered, making it simple to find the one that will suit your objectives. Afterwards, when you find a property it’s important to carry out your due diligence to avoid unexpected issues.
Understanding Cash FlowA financial commitment as big as property investment can be daunting when you don’t know the process. While there is potential to make continuous sums of money, a lack of knowledge surrounding cash flow and its generation presents risks. You don’t need to have the knowledge of an accountant but an understanding will come in handy when making your investment decisions.
SettlingInvesting in property is a big financial commitment, therefore, it's crucial that you choose the property that is right for you, not a property that ‘nearly fits’ your objectives. Soaring demand for rental properties means there is ample opportunity for property investments. Bearing this in mind will allow you to refrain from diving into an investment - taking your time to select the one that fits your portfolio best.
EmotionsProperty investing is not the same as buying your own home. Buying your own home is full of emotion. When buying your own property you will envision living personal life events and milestones within it - raising a family, birthdays, christmases etc.
The difference with buying an investment property is there is nothing personal - think of it as a business transaction. Think with your head, not your heart. Of course, considering how attractive these aspects of a property are will be beneficial as they will contribute towards rental or selling success, however, think of it logically rather than allowing your preferences to influence it.
Over ThinkingWhilst it is advised that you stop yourself from diving in right away, it’s also essential that you don’t overthink a potential investment when trying to find the property of your investment dreams. Don’t turn down great opportunities for the hope of something better, this could place you in a never ending cycle.
TrustProperty investment is more than generating an extra income. You will need to be prepared for the dedication that comes along with it. This dedication can be eased though by putting pride aside and accepting help. By enlisting a strong team that you have the confidence to instil your trust in you can gain assistance in key areas such as sourcing, renting/selling, renovations etc. The advantage of having a team is that these people will hold more knowledge surrounding these areas than you do. Meanwhile, this is a great benefit for those who are time poor. With a solid team you open the potential for them to manage your investment while you focus your time elsewhere.
PlanningEveryone says it but that’s because everyone needs to hear it. Planning is ESSENTIAL. Without a plan you open yourself up to the risk of making mistakes. A plan outlines clear direction, allowing you to make greater informed decisions and strategies and organisation. A plan can act as a schedule of works, ensuring everything remains on track, keeping things organised. Having a plan in place will contribute to the success of your investment, especially if you are working with a team.
Exit strategiesSuch as life, things don’t always go the way we hoped, so why should property investment be any different. Should your investment not go to plan it’s important you have a back-up plan in place.
There are many options when it comes to your exit strategy for example, value based exit or time dependent exits to name a couple.
With a value based exit strategy you sell your investment on when you are able to gain your desired return, i.e when the value of your property has increased, allowing you to achieve a higher selling price than you originally paid.
A time dependent exit is exactly what it says. After you have owned the property for a certain amount of time you then choose to sell your investment and move on.
ConclusionProperty investment is a big step and a huge commitment, therefore, it’s important to ensure you do it right. By carrying out research and due diligence you will give yourself the advantage of knowledge, allowing you to know what you are looking for and what to expect.
Knowing the basics of cash flow will help you make decisions when it comes to selecting your property for investment. This understanding will enlighten you as to what will work for you and what to avoid.
Outlining your objectives before hunting will help you determine which properties will be a good match for you and which properties to move on from. By keeping these objectives at the forefront of your mind you can set the wheat from the chaff and not settle for less. This being said, don’t play the waiting game to find the ‘perfect’ investment.
Starting out can be scary but with a team behind you you can achieve your desired outcomes. Property investment is a great industry for networking, therefore, you don't have to look far to find a great team.
To keep your objectives on track and your team in check you need to have a plan in place. This will help with the organisation of your investment and any work that goes along with it - making your life easier. Ultimately, a plan reduces your stress.
Being prepared is vital. This means having an exit strategy. By having an exit strategy in place you can determine what you want to achieve from your investment, while having the opportunity to remove yourself from it when things don’t go as planned.
Disclaimer: This is information based on our knowledge gained throughout years of experience, education and learnings. This information is open to interpretation, therefore, you must carry out your own due diligence regarding the subject.