18 Rules of Staying Safe When Buying an Investment Property
When buying an investment property it is essential you pay close attention to the following 18 Rules which are designed to keep you safe.
1. Only buy with an exit strategy in mind. This means you should always be looking to sell at some stage. The property you buy will need to appeal to both an owner-occupier, as well as another investor. To ensure buyer demand and capital growth, you should only ever consider buying a top quality property in a quality location.
2. Don’t listen to people who say you should hold for the long term and never sell. By all means hold property for the medium to long term in order to maximise returns, but don’t be scared of taking a profit, especially if that profit helps reduce personal debt.
3. Don’t leave yourself vulnerable by using all your equity when investing in property. To be safe, make sure you have a safety net such as shares or cash at hand , and always leave the equivalent of at least 3 months net household income aside for any emergency, even if this means you can’t invest for a while.
4. If a property sales person gets you to sign a contract in the presence of a solicitor - you lose your cooling-off period. No matter what kind of ‘great property deal' you are offered, do not let anyone convince you to sign on the day with solicitor's advice. Period.
5. Don’t listen to any property advisors who have a one-size-fits-all type of approach. What suits one property investor will not necessarily suit all property investors.
6. Don’t buy an average property, or buy in an average location just because it has good cash flow. Cash flow is important, but many people sacrifice quality just to get good cash flow. In order to generate a better long term proposition, try buying a quality property in a quality area with affordable cash flow.
7. There are a lot of good Real Estate Agents out there, but never forget that Real Estate Agents only act on the vendor' behalf, and not you. They are paid to sell you any property they have available. So no matter how great you think an agent may, be always keep that in mind.
8. Unless you have a compelling reason, always buy in the median price range for the locality in question. Buying at both the top and the bottom end of the market only increases the risk of your investment.
9. Use a mortgage broker you can trust to do all the research on the best loan for you. It is just too hard doing it all yourself. And no matter how nice the person at the bank is, they will only ever be working in the bank's interest, and not yours.
10. If you have any personal debt - then capitalise the expenses on your investment property.
11. Use an Accountant who understands rule number 10.
12. Use a Solicitor or Licensed Conveyancer who understands Offer terms and conditions and can personally take you through the contract page by page when signing.
13. No matter how old the property is, make sure you obtain a professional Quantity Surveyors Report to maximise your tax deductions. Do not do any work on an investment property until you have received your Depreciation Report.
14. Create a safety net by having sufficient insurance that protects your financial situation. Make sure all your hard work is not undone by some unforeseen situation.
15. Employ a Property Manager who works for you, not the tenant. Also make sure you get an independent rental appraisal before you buy.
16. By all means take the advice of people who warn you to be careful, and tell you to do your research on who to trust. However, don’t let their good advice, or the negativity from well-meaning family and friends, stop you from investing. If they are really keen to help then ask them to mystery shop the property company on your behalf. Ethical companies have no problem with being mystery shopped, as it will only serve to enhance their reputation.
17. Be wary of companies and seminar spruikers who promise to keep you safe by talking about the dangers you face when buying an investment property. They can be some of the worst offenders in the industry. So always do your due diligence on who you can trust - including us, The Successful Investor. When you deal with an investment property company, ask them what events they hold where clients can mix freely. That way you can talk with others who have done business with them. You'll find most unethical companies never put their clients in the same room together. At The Successful Investor however, we have an open office on the first Thursday of each month where all our current clients and guests can share an informal drink with our team.
18. Take action today. If you really want to create wealth then what is stopping you? A $400,000 property at 6% growth will create $400,000 equity in just 12 years. Ask yourself, how else will you make that kind of money? And please, do not make the mistake of paying off your mortgage before you get started.
If you have any questions about our 18 rules please email michael@thesuccessfulinvestor.com.au
For more tips and suggestions on how to stay safe when buying an investment property, download our Free Report - Cracking the Real Estate Code - from the website.
www.thesuccessfulinvestor.com.au
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