Property investment can get you well on your way. We know that the first hurdle for new property investors is identifying ‘the why’. Goal setting is the key.
On the go? Here’s 30 seconds of key take outs:
- To make a [re]start in property investing you need to understand where you are now, and where you want to get to in terms of finances and lifestyle. Purpose and intent will propel your plan into action!
- Once you’ve identified your goals, it’s time to take a good hard look at where your money is going right now, and how you can channel it into a savings plan.
- Buying your first or second property investment isn’t easy. Stay the path. Remind yourself often of why you’re doing this. Once you’ve purchased your first or second property investment, it all gets a little easier.
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Your first step to property investing is to know what your lifestyle goals are
Without knowing where you are now and where you want to get to, you may as well put a map of Australia on the dart board, take a pot shot and go buy a property wherever the dart lands. That’s how random a property investment strategy will be if you don’t have a goal and a plan to get there.
You need a clearly defined route, with destinations mapped out along the way to reach a dream. And you need to understand what that dream is.
Go old school and grab a piece of paper and a pen. Now write down what this day five years from now will look like. Consider:
- Who will be sharing your day with you, if anyone?
- Where will you be living?
- What do your surroundings look like inside – technology, furniture, number of bedrooms and living areas, size of your kitchen, interior style? Outside?
- How will you be earning an income?
- What will your health and fitness levels be like?
- How will you be spending your spare time?
- What sort of vehicle do you plan to be driving?
- What will a typical weekend look like?
Now do the same ten years from now, and consider fifteen years on.
Once you have a clear idea of how you want your life to be, you’ve just set your vision! Keep this piece of paper handy, so you can remind yourself from time to time as to why you’re working hard to invest in property.
From there, you need to whip yourself back into today. How close are you to reaching that lifestyle five years from now?
Your second step to property investing is to start saving right now
If you haven’t already started saving some of your income every pay, it’s time! But you’ll need some motivation to swap going out money for a savings plan.
Now that you have your 5, 10 and 15 year vision written down, what steps do you need to take to get there?
5 action steps to take to start saving for your property investment deposit
- 1 Set goals: now you have your lifestyle vision, it’s time to commit to some goal setting. Find out how in our blog article about how property investors squash distractions by setting goals.
- 2 Start tracking your budget: get a clear picture of your spending habits. Simply knowing where your money is going can be a huge step in grabbing control of your spending habits.
- 3 Take control of your debt: finding a lender that will consolidate your debt can help you move into a better position to save more and increase your borrowing capacity (that means how much a financial lender will loan to you). Bad debt includes credit cards, car loans and personal debts.
- 4 Set a savings target: as a starting place try to aim to save enough for a 10 percent deposit plus costs. For example someone earning an annual income of $80,000 with no personal loans or credit cards, and receiving rental assistance could afford to buy a $400,000 property provided they had $50,000 in savings or equity of which a 10% deposit is $40,000. An additional $10,000 would need to be available to you to fund the costs associated with legal and bank fees, stamp duty (where applicable) and miscellaneous settlement costs.
- 5 Calculate how much of your pay you’ll need to put aside: once you understand how much money you need to live on pay day to pay day; you’ve reduced your debt and the cost of your debts; and you know how much money you’ll need to start investing in property, you’ll need to work out how much of your pay you can channel into your savings plan each pay day. Set up an automatic transfer straight from payroll into a nominated savings account that you won’t touch until you’re ready to buy your first investment property.
Don’t let your calculations of savings and how long it will take you to get there, put you off. Once you’ve put in the hard yards and bought your first investment property, it all gets easier. It’ll be well worth your commitment.
If you need a reminder to keep you on track, revisit your lifestyle goals.
Your third step to property investing is to write your plan
A vision is great along with a savings plan, now it’s time to get really serious and commit your plan to paper.
2 action steps to writing your property investing plan
- 1 Where are you right now? Get a good sense of the financial resources you currently have in the form of an assets & liabilities statement. Use our Preliminary Finance Assessment tool to work this out. This will give you your starting point and your goals will give you an end point. Develop your plan based on these two things.
- 2 Gather your support team: once you’ve hit your savings target of around $50,000 you’ve got the green light! Start by engaging a property investment professional and then build your team. Your team includes a real estate agent, a mortgage broker, conveyancer, builder, property manager, property focused accountant, and maybe even a financial planner. Better still, meet the Capital Properties team.
#StandEasyTip: When you start your journey you’ll no doubt be asking your friends and colleagues about their property investing and how they do it. What you’ll notice is everyone has a different approach. This is because everyone has different goals and a unique financial position. Your approach needs to be tailored for your situation.
Your fourth step is to understand your risk appetite for property investing
Just like everyone has different goals and starting positions, everyone has different attitudes towards debt, investment and savings.
The stage of life you’re at and your personality will determine the level of risk you’re willing to take on.
For example, when I was younger I was willing to take on more risk, because I didn’t have as many responsibilities! My timeline was longer too. If I made a mistake I had time to sort it out.
When you’re older your timeline is shorter and you’ll be less likely to want to take on investments with higher levels of risk.
Your fifth step to property investing is to continue educating yourself
When it comes to successful property investing, education is key to making switched on investment choices to reach your pinnacle. Make property your trade and commit to it.
At Capital Properties we’re passionate about educating people like you. Here are some of the resources you can tap into:
- Download and follow our Free Quick Start Guide.
- Research the Capital City markets by downloading our Free Property Market Report.
- Attend one of our Capital Properties’ seminars or workshops.
- Talk to other switched on property investors at one of our social events.
- Learn how to select property that will grow your income by downloading our Market Overview | Property Selection Criteria.
- Calculate your cash flow by using our Property Gearing Analysis tool.
- Review your personal expenditure by using our Budgeting Planner.
Because everyone will have a different approach to building an income stream from property, there isn’t a one size fits all approach. Find out more about how to personalise a strategy just for you by reading an article I wrote to help – Switched on Strategy Series 3.
Make the move. Find a meaningful purpose, put a savings plan into play and if you can find the right property that can support your purpose, well done you! Your commitment to achieving your goals and educating yourself is an investment with ongoing returns.
Get some experts around you to help you on your way: Pinnacle Program Support