You want to be successful when investing in real estate. Therefore, the first step you should make is to get advice from a qualified professional. When we say qualified professional, it means that you are getting advice from someone who has already reached the goal you want to achieve or from professionals who have helped so many investors reach the success they are enjoying at the present.
Before engaging in real estate investing, you will need to have the mindset of a businessman. A good businessman will have four critical factors in order to succeed. These four factors are as follows:
- The correct psychology or mindset to make things work. It is what they call “guts” and positive thinking.
- Right plan and system. As you want to think like a businessman, you should act like a businessman. Thus, you will need to have the right planning and system to make things work.
- A team of experts. Get the right advice from professionals and experts who have the same mindset as you do. The right team will want to help you succeed.
- The right property. You should be able to find the right property that will give you returns on your investment and less of the expenses.
When all these factors are considered and followed, you know you are on the right track in making your journey in the real estate industry a success.
7 Steps to Make Real Estate Investing a Success
1. Find the right funding for your investment
Where do you get funds in investing in properties? For many who are already in the real estate industry, most of their investments were purchased through financing. While home loans are the most popular route to fund your investment, you may also want to consider an SMSF loan or an equity loan.
When searching for the right funding for your investment property, it is always a good advice to go through a mortgage broker who has the right connections in the real estate industry. They can match you to the right lender who can provide the funding you need.
Home loan for property investment.
Property investment loans work much like a regular home loan. You can choose between a variable interest loan or a fixed rate loan. Most property investment loans require a deposit. It really depends on your circumstance. The standard deposit to make is at 20% of the total property value. However, there are some lenders who can extend 95% investment loans which means you can make a smaller deposit of up to 5%.
SMSF loan for property investment.
You can use your superannuation to fund a purchase for a property. To do so, you will have to set up an SMSF or a Self Managed Super Fund. This is the only way that will allow you to use your super for property investment. Know more about SMSF loans.
Home equity loan for property investment.
You can finance an investment property by unlocking your existing home equity. Home equity is the value of your home. If you still owe money on it, then the your home equity is the home value less the money owed on it.
For instance, if your house has a value of $500,000 and the money owed on it is $120,000, then the equity on the home is at $380,000.
This equity can be taken as a deposit on the property investment you looking to purchase. Your current home property turns into a security or a collateral for the new financial debt. Find more information on Home Equity Loans.
2. Get a financial pre-approval.
Once you have been matched to the right lender who can offer you the right loan for your investing needs, go through the application process. When you meet the criteria of the lender and provided them with the documents they need, the lender will issue a letter of pre-approval.
Once you get a pre-approval, you should be able to know how much you can borrow and how much deposit you must put down. When you know you are qualified at pre-approval, this makes you market ready for your real estate investment.
3. Find the best investment property to purchase
To help you choose a good property, you would want to speak to a property consultant, a property manager, or a real estate agent. Find a really good property to make sure maximum borrowing capacity is utilized. As a word of advice, don’t exceed your maximum borrowing capacity.
When choosing a property for investment, make sure you have done your research. What should you be looking for in a good property investment? Here are a few things you should be looking at:
Make sure that there is no caveat on the property you are investing in. You can search the register of the property. The search will show any or the absence of caveat (claims on the property). If a caveat is present, the solicitor can help you understand what the caveat is and you can decide if you should push with your investment.
Consider the location of the property. It’s a common understanding that most people who rent properties would rather rent a place close to the central business district, somewhere close to a public transport, or somewhere close to universities.
Know what kind of property is on demand. Talk to property managers, talk to real estate agents, and you can also check ads to find out what’s the most desirable type of property in the market. Don’t just look at the rental returns but look into its capital growth too.
Follow the 1% rule which should be close to the area’s median price. The one percent rule multiplies 1% by the selling value of the property to establish a base amount for monthly rent. This rule implies that the investment property must be rented for at least 1% of the total purchase price to generate a positive cash flow.
For example, if you have a total purchase price of $200,000 – this means that you should be able to rent out the property for $2,000 monthly for a positive cash flow.
4. Talk to an accountant regarding asset protection and tax minimization.
Once you sign a contract of sale on the property, you can choose to put the property after your name and the nominees, and then you can nominate an alternative structure or an entity to settle the property so you have plenty of time to think about whether you should be buying the property in trust, your personal name or whatever you choose.
5. Employ an independent solicitor or conveyancer before you sign the contract of sale.
They will review the contract for sale for you. This is to make sure that the contract of sale is rebalanced and in your favor and not in the favor of the vendor or the developer. That’s very important. You’ll be amazed how many times you go to a solicitor and they’ll say look these are the following things that we recommend you modify in the contract of sale so make sure you do get a very good property solicitor or conveyancer.
6. Get the services of a good property manager.
Never manage the property yourself. Pay the 7% plus GDT. These guys are professional. You don’t want to get involved in the lives of your tenants. You’ve got to think of investment as a business. You’ve got to have a professional to look after your property. Everything has to be done with the least amount of involvement from your end. You want to make this whole thing passive especially if you are willing to build a substantial property portfolio.
7. Get a Landlord’s Insurance
A property manager will require you is to get a landlord’s insurance before they even start doing business with you. So you will have to consider checking which insurance companies can provide you the best of this type of protection. This is your contingency plan in case the unexpected happens.