Investing in the property market can provide many ways in which to profit, but it can also be fraught with information overload.
Buying an investment property can often place a homeowner on unfamiliar ground, and that’s even if they’ve purchased a property in the past.
Unlike your primary place of residence, an investment can provide you with a steady rental income over time in addition to the rewards that come with capital growth – and it’s not to forget that there are a plethora of ways in which to invest in the market and turn over a profit.
As director of Caifu Property, Drew Evans, shares in a Yourmortgage.com.au web series ‘your guide to buying your first investment property’, an investor’s mindset has to be of the proactive kind; they have to be open to learning the ways in which they can put their money to hard work, and they have to make the time to understand and assess their financial options.
“It’s all about being able to buy under market value and then add value,” Evans shares, when sitting down with Yourmortgage.com.au editor Sarah Megginson to discuss how first-time investors can take the initial plunge.
“It’s about investing in real estate that’s going to provide enough cash flow that doesn’t impact your after tax cash flow, and doesn’t impact on your lifestyle,” he says.
However, just like buying a home, there are high stakes involved when it comes to purchasing your first investment property, and a number of other influential factors that will shape how much goes back into your pocket. But how do you know whether you are ready to invest? And how much cash or equity do you need to have in hand to begin?
In the web series, Evans sheds light on these questions and more, including how income and access to funds – also known as your borrowing capacity and borrowing power – are two of the most important determiners.
“The next thing it comes down to is what type of property are you actually investing in. Is it postcode specific? Is it a house? Is it a unit? Is it a development? There are quite a lot of different variables when you ask that question,” Evans says.
“But you can get started with as little as $45k to $50k, to get access to instant equity deals.”
It’s also important for the investor to be clear on their goals and their strategy.
“I would have 100% certainty on exactly how much you can borrow. I would have 100% certainty on exactly what your cash flow commitments are, and I would make sure to build a buffer,” Evans says.
Being financially prepared for when the tables turn can help to minimize some of the potential risks that are often served to an investor in an everchanging market.
“When you purchase in real estate, it’s really important to understand exactly how you are making your money, not relying on external forces such as time,” Evans explains.
To find out about what’s involved when purchasing your first investment property, and the dynamics of the process, watch Drew Evans’ full video interview.