Including a free tool for BluePebble Clients
Investment in real property, such as residential real estate, is likely to be a lengthy process and one that usually involves a plan for the long term. To ensure you have considered what is required before making the big purchase, we’ve outlined steps you need to take in that process.
1. Make the commitment
A property investment must be a long term commitment in order for it to be worthwhile, so the very first step is to crunch the numbers, in order to evaluate your budget, potential constraints and future financial and personal obligations including the potential impact on family members.
Consider your future as far ahead as you can. You need to assess your ability to maintain or improve personal income as well as your commitment and ongoing financial capability to continue to service the financial impact of the investment for a minimum of five to ten years, as that’s what generally brings premium results. You need to also make the commitment to ‘manage’ the investment – even if you outsource the day-to-day tasks involved including locating suitable tenants, collecting rents, paying relevant costs in rates and taxes as well as ensuring that the property’s repairs and maintenance are kept up to date.
2. Obtain Finance Pre-approval
Unless you have cash or other investments that can be converted to cash to purchase your next property, the next step is to contact us to help you to secure finance to enable purchase. This will give you the opportunity to ask us as many questions needed to alleviate any uncertainty you may have about securing that finance.
Pre-approval is not an offer of finance, but does give you the confidence to start placing offers on properties. Pre-approvals will last for 3 months with an opportunity to extend it for another 3 months with updated financials.
In order to apply for finance, you will need proof of your current income, employment and your assets as well as all liabilities including debts, loans, rental payment, outstanding credit card obligations and any other due payments, for example, buy now pay later commitments. Collate these and also any paperwork that helps support your personal position. For example, if you have been a long-term tenant, get a 12 month tenancy statement that proves your capacity to make regular repayments. Before applying for a loan, minimise your current debt load, and if possible, reduce the limit on, or cancel any credit cards you have, as this is perceived by lenders as potential for debt.
3. Obtain advice from other property professionals
You now need to obtain professional advice. An investment in real estate is likely to be significant in relation to your current financial position. If you have already discussed the investment with a licensed financial planner or investment adviser, and residential real estate is considered the most appropriate in your current circumstances, you will have considered aspects including rental return, maximum capital growth and/or tax effectiveness.
You next need to locate a suitable property. There are buyers agents now available who can assist you in this process – potentially saving you money by disregarding inappropriate properties and concentrating on those that are more likely to deliver the highest return and capital increase to you over time.
As an alternative to a Buyers Agent, we are offering our clients a free tool that has helped ourselves and our clients locate properties producing rental yields above 7% and at the same time, capital growth of 14% over 5 years. Use of the tool does require some time commitment, however, does save you Buyers Agent fees.
Using the services of an accountant, financial planner, solicitor/conveyancer and property manager on your team will also assist you in coming to your decision.
4. Assistance from relatives & friends
Talking to friends, family and acquaintances who have already made such an investment, or are currently considering one, can help your awareness of stumbling blocks and potential issues that you might otherwise miss. While any issues you face may seem new, it can help to bounce these off a trusted friend or relative who has been there before.
It must be said, however, that you should avoid the trap of listening to a friend or family member when they tell you where to buy, unless they are a qualified Buyers Agent or seasoned investor, themselves.
5. Other things to consider
An investment property purchase should not be an emotional decision. It is a business decision. If the property isn’t as clean as you would like, don’t assume that it hasn’t been maintained unless there are other clues to demonstrate that. Cleaning and even simple maintenance tasks are things you can do yourself or have done for you that you can include in your budget.
Here at BluePebble Loans, we're an Investment Savvy Brokerage who have, ourselves, walked the talk in the property investment game. Get in touch to get your hands on our free property-finding tool that offers you the potential to create a lifestyle of choice for you and your family.
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