Property has to resonate with the heart and the mind, but when making a purchase it is fundamental to make a financial decision before making an emotional one. Unfortunately, some buyers get so excited about buying a property they often make choices with their heart – which are usually poor ones.
Before purchase it is essential to know the median house price, capital growth rates and rental yields of your area. Without such knowledge a poor purchase could be made – potentially resulting in little or no capital growth or rental income for months at a time, thereby leaving you out of pocket.
While taking action is normally better than doing nothing, buying over-priced property can set you back years financially. I recommend that prospective purchasers see at least 100 homes in the area in which they intend to buy. A purchase that will provide capital growth of 7 – 10 per cent and yields of about four to five per cent is the key for investors that want to build long-term wealth.
My personal experience in investing has been an incredibly fruitful and lucrative journey. It took me only nine years to gain financial freedom through property investing alone.
Property has to resonate with the heart and the mind, but when making a purchase it is fundamental to make a financial decision before making an emotional one. Unfortunately, some buyers get so excited about buying a property they often make choices with their heart – which are usually poor ones.
Before purchase it is essential to know the median house price, capital growth rates and rental yields of your area. Without such knowledge a poor purchase could be made – potentially resulting in little or no capital growth or rental income for months at a time, thereby leaving you out of pocket.
While taking action is normally better than doing nothing, buying over-priced property can set you back years financially. I recommend that prospective purchasers see at least 100 homes in the area in which they intend to buy. A purchase that will provide capital growth of 7 – 10 per cent and yields of about four to five per cent is the key for investors that want to build long-term wealth.
My personal experience in investing has been an incredibly fruitful and lucrative journey. It took me only nine years to gain financial freedom through property investing alone.
1. Do your research
Look at as many properties as possible to get an idea about prices in your area, what adds value, which types appreciate faster, how to get a good deal (getting properties at much lower than market value), and what are the pitfalls of a too-good-to-be-true deal.
2. Get the property valued before you buy
Even if you’ve done sufficient research buyers can still pay overinflated prices for properties. I always pay for an independent valuation every time I buy.
3. Get the property valued before you renovate
One of the biggest misconceptions investors have is that the more capital they spent on a property, the more profit they will make. This isn’t always the case. A valuer can tell you what your property is worth now, what it will be worth after planned renovations, and whether your new $30,000 kitchen will actually add $30,000 to your property’s value.
4. Get a good property manager
This is the best way to maximise your rental income and to ensure that it rises with the market. Most self-managed properties are under-rented as owners are often hesitant of upsetting tenants. The property manager will also be able to keep on top of maintenance and other issues to do with the property.
5. Location, location, location
Look for areas with potential for high growth and yields. Important things to look for are proximity to public transport, leisure activities (parks, beaches and lakes), work and schools. Pay for some independent research which will tell you what the highest-rated suburbs are – it’s worth it!
6. Buy “better” properties
Physical factors to look for when researching properties are good-sized bedrooms, off-street parking, good positioning and a uniqueness that sets the property apart from others in the street. These will ensure the property grows in value and desirability.
7. Buy blue chip
Cheap properties are often cheap because they are not in great demand and there’s plenty to choose from. It’s often worth paying market value for a better property in a top suburb than it is to get a discount for something that no one else really wants.
8. Buy at, or below, market value
There are ways to acquire good properties below market price. In a flatter market, for instance, clearance rates are around 50 per cent, making properties harder to sell. Here, buyers have greater bargaining power. Unrenovated properties in good areas can fetch lower prices and provide good yields post-renovation. Another way is to buy in an emergency sale situation such as when vendors need to sell to finance a recent buy or relocation and are hard-pressed to do so.
9. Get a good mortgage broker
As an investor a good broker should be one of the most important professionals on your team. If I can borrow 80 per cent of a property’s value rather than 70 per cent, it means my limited deposits go 50 per cent further as I only need to put 20 per cent down rather than 30 per cent. It’s not always about getting the cheapest rate, and the more legwork the broker does for me the more time I can spend finding a better property.
10. Stick to your strategy
Work out what works for you. Once you find the strategy, stick to it, while also remaining aware of other opportunities and taking on good advice. A good strategy doesn’t have to be complicated – it’s often the simple things that work best.
About Chris Gray
Chris Gray has nearly 20 years’ experience in property investing and education.
10 tips for maximising capital growth and yields
Chris is CEO of Empire, which searches, negotiates and renovates properties on behalf of time-poor professionals. He is host of Sky News Business Channel’s “Your Property Empire” every Friday, and was Financial Judge on Network Ten’s “The Renovators”.
He provides property investment tips and commentary in his regular column, “The Buying Guy”, published throughout News Ltd newspapers. For more please visit www.yourempire.com.au
