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Property - Do your homework!

As with everything in life, there are risks; Property investing is no different. Some are real and some are just perceived. You need to do your own research and become educated to understand the difference, and to protect your assets.  Most budding property investors start out by leveraging their own home, which gives them a good opportunity to start. This is a great decision, but also a big decision for many people, and not one that should be taken without thorough research to make sure your home is protected as much as possible. If you're not willing to take some calculated risks, then it's very unlikely that you can get ahead …

“Progress always involves risk. You can’t steal second base and keep your foot on first.” Bob Proctor

Rachel says it is important to understand what strategies are available and which strategy is best suited to you. All strategies have positive and negatives aspects. Rachel says that it comes down to what your preferences are and the type of lifestyle you wish to enjoy. For example, she says, reflecting on her own experience, “I don’t really like renovating. I don’t have a flair for walking into a home and seeing the potential.” She prefers to look at the numbers. “If we buy now, what will it cost, what rental return could we expect, and will this cover our costs for the period we intend to own the property.” Another investor could come across a run down property and decide they are happy to renovate and thus increase the value and equity, which allows them to buy yet another property. “That’s a great strategy,” Rachel says, “but it’s not for me. There are a lot of different strategies and that is why it pays to get educated and do your research.”

Education is important, reminds Rachel. In her experience, she says, she has come across a number of property investors who have taken their real estate agents advice and bought into an investment property. Rachel says, whilst she has no issue with real estate agents, she points out they are working on behalf of a vendor not the buyer.  Often she has heard first hand stories of budding investors who purchased property on the agent’s recommendation, didn’t do enough research, found it cost too much, and then sold at the wrong time and lost money.

You need to do your homework. It is important to decide on the right strategy for you from the start, and then, in conjunction with the real estate agent, the budding property investor should seek the advice of their accountant, financial planner, and solicitor. For example, a solicitor who specialises in property investment will be able to advise and recommend the best structure to put in place to purchase property based on your strategy, which might be a family trust. If you want to restructure your portfolio later, because you didn’t start with the right advice for your strategy, you could incur considerable costs in stamp duty and the realisation of any capital gains from transferring property titles from one structure to another. Devising the right strategy to launch your property investment career will not only be tax effective, it will also help ensure your assets are properly protected.
 
Rachel also points out that before you go to see these professionals, it is a good idea to thoroughly educate yourself, read books, become familiar with the strategies available, and go to workshops like those put on by www.propertywomen.com.au. When you have the knowledge, you will know what the right questions are to ask these professionals. Rachel warns to be careful whose advice you seek. For instance, a financial planner who is focused on promoting managed funds will be less likely to know about property investing, let alone recommend it. However, when you have thoroughly done your own independent research, you will find you are in a much better position to ask the right questions, of the right people, to get the right answers.

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