Buying your own home is an emotional experience. You have a firm idea of the area and the features you want, but really, when it comes down to it, your final decision will be based on whether it’s ‘the one’.
On the other hand, building a property portfolio requires your utmost dedication to the path of logic. If you have ever watched that British show on Foxtel – Property Ladder – you will know that investors are prone to making a mess of things the minute they fall in love with their investment property, or even worse, see its ‘potential’.
Building a property portfolio will always be one of the most enriching and exciting ways to secure your financial future, just as long as you satisfy a few key criteria in the process.
Diversify the spread the risk
In the very first stage, you can consider investing in a unit if you already have a house and vise versa. If you have a number of properties already, look at the balance in the portfolio and what you want in the new property. This will take into account growth vs income, and of course the weighting of strata fees, land taxes, rates and location.
Location. Of course
Don’t think you need to invest near where you live. Sure it might feel safe, but remember, you need to remove emotion from this exercise.
Australians are one of the most uninsured nations in the developed world. That doesn’t just relate to Landlord Insurance. Income protection is a must, and it is so easy to incorporate in your superannuation that you would have to be mad not to make this a mandatory part of your financial strategy.
Think about the tenants
After all, you are buying a property for other people to live in, so have it clear in your head exactly what kind of people you want to live there. Build a picture around possible professions, transport needs, number of tenants and features of the property. These considerations will help you attract quality tenants and secure a longer lease.
Make a plan and stick to it.
Just like any business venture, a property investment carries opportunity and risk. The most successful investors always document their objectives, financial projections, timelines and contingency plans so it is much harder to get swept away be emotional bias. And the really clever ones give their plan to a trusted friend or advisor and have them challenge any decisions that might be heading off track.
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