Our property story blog series so far has provided an overview of our start in property. Though we have covered it all within a few weeks, in reality the journey has been a much slower one. This has allowed us to learn and grow along the way, learning lessons on all aspects of property. We know when it comes to property investment it is important to take time to create a strategy and have a plan to set yourself up for a win - as well as knowing what defines a win for you.
Property investment is not for everyone. It’s also not a guarantee to create instant wealth overnight, or an answer to financial issues. Although there are many stories of the opportunities which property can provide. I have put together my five top tips to set yourself up to buy well from a property investment perspective.
1. Know Why
Before you commit yourself to a mortgage and the responsibilities that come with having an investment property – take time to understand why you are doing it. Is it a stepping stone to having your dream home in the future, to generate wealth, create cashflow, retire early?
As with many areas of life, the clearer the vision or goal the easier it is to know what direction (and decisions) to take and know if your heading in the right direction. The more clarity you have on where you want to be, the better decision-making you can make along the way. Its not easy to define a clear goal and may not come quickly. But taking time to think about ‘why’ you are investing will help you steer your decisions and investment strategy to achieve your goals.
2. Know Your Position
I have heard many times someone share they can’t afford to purchase a property, then find they have not talked with a bank or mortgage broker to understand what’s available to them or required to make it happen. While not everyone’s situation will allow them to, I would say many people would be surprised at what ability they have. Whilst I’m not saying its easy, I believe that there are options if you are focused and determined.
We asked Kayne Wahlstrom, owner and founder at Money Empire to share his advice:
He says: “We strongly recommend sitting down with your mortgage broker or financial adviser and making sure you explore all your options. For example, for us, we can help you find answers to enquiries like; what can I commit to or afford right now? How much spare income could I have to top up a mortgage? What will my bank lend me? How much Kiwisaver can I access or can I get the home start grant? It's about thinking beyond just savings or returns and really looking at the kind of long-term financial model you want to build. You'd be surprised at some of the things you can use to get into property investment!"
Before you start, you need to know from where your starting - understand your position. Whilst you may not be able to go buy a property now, knowing your position will allow you to know what is required and develop a plan to get there.
3. Know your Options
When it comes to investment, there are many options available – property, shares, business, the bank (and more). If you have a savings account or enrolled with Kiwisaver – you are already doing some form of investment. Each type of investment come with different levels of risk and return – which can be chosen to suit you as an individual and your attitude towards risk.
Kiwis are very house-proud people and have a love for property – so the typical kiwis investment is skewed towards property. I’m not saying that’s a bad thing (we fall into the same category), but I’m an advocate for knowledge and understanding before passing over your money or committing to a 30 year mortgage.
Explore what your options are - you have choices. Take time to know what these are, be informed. If you can’t afford a property now, what can you do now? There is always something. Whether it be putting that $100 weekly disposable income into shares or savings instead of spending, or using your time to research and learn. Get into the habit now.
4. Do your Due Diligence
This isn’t by any means new advice – any bank, mortgage broker, agent or property coach would all share the same point. Before you go unconditional on a property – do your due diligence. Simply put due diligence is about taking time to understand the ins and outs of your investment so you are aware of what you are purchasing. Common acts of due diligence include getting a builders report, valuation, loan approvals, LIM report and title checks undertaken.
For me due diligence starts well before even looking at a physical house. Whether it be researching the market to find trends and underperforming locations or researching specific areas and identifying value. Due Diligence and research is all about making wise and informed decisions. Knowing the outcomes, the risks and benefits before you commit to that decision.
5. Don’t rush – but act quickly.
All these thoughts so far have been about taking time to set the platform before you make an investment. Personally, I’m conservative and want to be confident that I’m making a good decision before jumping all-in. By taking time to do understand where you want to head, what your position and options are and having completed due diligence in the locations your focused on - when opportunities arise you will be in a position to act quickly. This is different to rushing a decision. Rather you will have confidence in the decisions you make.
For anyone looking to get an investment property or wanting to know the steps for them to get to that stage, we would recommend talking to experts like Money Empire – their team who are based in Auckland are friendly, speak your language and offer free consultations.