Starting with the end in mind means beginning a task or project with a clear vision of your desired direction and destination. To be a successful property investor, it is crucial to develop a game plan prior to purchasing an investment property, so you have a clear road map of where you want your investment to head and ultimately finish.
Firstly, do your sums. Sitting down and hammering out your financial position is the best first step you can take. By understanding what you can afford and what sacrifices you may have to make to afford an investment property is important for the longevity of the investment. Take into account various ongoing costs such as mortgage repayments, land rates, water rates, insurances, body corporate fees and maintenance funds to see if you are financially in a position to afford a property for the life of the investment journey.
Secondly, set a time line. Figure out how long you plan on having the investment for. Will it be five years, 10 years, 20 years or even 30 years? Having a timeline provides a finish line and you can plan accordingly.
Thirdly, list your reasons for investing. Are you investing within property for long-term capital growth? Leverage? Income? Tax breaks? Whatever the reason, make sure your game plan is in sync with the desired outcome.
Prepare for being a landlord. This is one of the largest aspects of property investment that people do not always have a game plan for. Being a landlord means you will have to make decisions on rent, maintenance, leases and tenants. Prepare for this. Have an idea of what type of tenants you want to attract over the course of the investment, what rents you will want to achieve and what sort of maintenance/renovations you may need. Will you have an expense account for the property? Money for a rainy day? If your tenant doesn’t pay, will you have funds to absorb the losses? It is always good to prepare for the unseen and prepare for the life of being a landlord.
Although property investment can be fun and rewarding, do not get too caught up in the beginning fun stages of the investment process. Much like buying a pet, property investment is sometimes for life and not just for Christmas. If you can afford a property now, make sure you can continue to afford that property down the track – especially if your current circumstances change. Plan and prepare to mitigate your losses should your financial position change over the years. Having a back-up plan doesn’t mean you are setting yourself up to fail, it means you are planning ahead for your property portfolio and setting yourself up to succeed.