Making a plan for buying either one or many investment properties should be constructed in a way that takes your current situation and lifestyle into account to help you decide on what your best options are.
Property purchases are usually one of the biggest purchases people make so being as well-educated and informed as possible is always a wise move.
Investment properties should be bought with the intention of;
Capital growth – The property increases in value over time
Cash flow (having them correctly geared) – Rental income covers the mortgage repayments, or at least, significantly contributes towards it
Providing income security for retirement – If you plan on buying to hold or;
Cost effectively renovating or developing to add value and profiting from doing so – If you plan on selling
Whatever type of investor you are, you have to ask yourself questions.
Any and all questions relevant to you and the type of investment property you’ll be taking on.
Firstly, and pay particular attention to this question;
Have you sat down and thoroughly worked out a 5 to 10 year plan factoring in all likely and unlikely situations both inside and outside of your control?
Then ask yourself questions like;
What are you hoping to achieve?
Can you afford repayments and fluctuations in repayments?
If you don’t have a tenant, can you afford to make full loan repayments, and if so, for how long?
Can you service holding costs?
Do you have adequate and surplus savings or cash on hand to pay costs, fees and taxes?
How has the market performed historically? How’s the current market? What’s the future expectations of the market? What’s likely to affect the market?
How is the current political climate?
How’s the current economy?
Do you have kids or are kids planned in the future and how will they be affected?
How will your family be affected?
How do you feel about the sacrifices that will need to be made over the short to long term? (Things you might need to cut back on like some general luxuries, holidays, new cars, expensive purchases)
By factoring anything and everything into your planning and decision making will help to position you to better understand, manage and overcome any situations, objections, challenges, speed bumps and pot holes that come up along the way.
One of the best ways to plan is by doing your research and asking yourself questions.
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This information is of a general nature only and does not take into account your objectives, financial situation or needs. We are not financial, legal or tax advisers. You should seek appropriate professional advice specific to you before acting on this information.
