How to Buy Your First
Investment Property
-A step by step guide-
This is an easy to follow, step by step guide to buying your first investment property. I have split the somewhat daunting task of buying your first property into 9 chapters. Each Chapter will walk you through the process in a simple and easy to follow format. Beginning your Property Portfolio should be a happy and fun experience that you look forward to. Too many people are too scared to take any action simply because they don't understand how easy it can be. I hope you enjoy this guide and it helps you take your first steps towards financial freedom.CHAPTER 1
Ok, so you have decided that you want to buy an Investment property but you're probably finding it hard to know where to begin.
Should I buy an old house? Should I buy a new house? Should I renovate? Should I buy a block of land and build a house? What doe'off the plan' mean?
All are great options but I'm going to focus our attention on what I believe is the best and most 'accessible' option that any ordinary person can use to fast track their Property Portfolio.
I like to call it the '5 R's
Strategy'
It revolves around buying an existing property at or under market
value. Then you simply follow the 5 R's.
Revamp
The idea is to buy a property that is 'structurally sound' but in need
of some cosmetic repairs. I won't go into too much detail
here but you would be amazed at how much value you can add to your
property by doing a few minor things. Whether you polish the
floorboards, paint the walls or even just replace some light fittings
you can literally add thousands of dollars to the value of your
property. In Chapter 7 (Revamp/Renovations) we will discuss
how much (or how little) you should do depending on your circumstances.
Rent
Simply rent your property out and start letting your tenants pay the
mortgage. Chapter 8 (Leasing out your property) will cover
the pros and cons of doing this yourself or going through a Real Estate
agent
Revalue,
Refinance & Repeat
This is the most exciting part of the strategy that ordinary people
don't realize is possible. If you have 'Revamped' your
property correctly it will now be worth more than what you paid for
it. What most people don't understand is that they can
actually get instant access to this money. Simply get your
property revalued - then refinance your loan and use this extra equity
you have created as the deposit for your next property.
WARNING - Make sure you don't refinance and then use the money to buy a
plasma TV or go on holiday. Leave that stuff until after your
2nd or 3rd property. Don't worry if the idea of refinancing
is a little confusing Chapter 9 (Revalue, Refinance &
Repeat) will go into it in much more detail
So now that you know roughly what your plan is you need to decide Where and What to buy?
Let's start with
Where? What area should you buy your first Investment
property?
This is a very important question but please don't let it be too
important. What I mean is that lots of people get so stressed
out about where they should buy, that they end up doing nothing at
all. There are plenty of websites and companies that can give
you great information and research about predicted 'high growth' areas
which can make you hundreds of thousands of dollars down the
track. So definitely take advantage of the resources that are
out there. Another aspect to consider is that if you are
going to be spending some time revamping & renovating your
property then it would be silly to buy in an area that was a 7 hour
drive away. So do your research and use your common
sense. Most importantly don't stress too much and try to
enjoy the research - It should be fun.
Now the question is What?
This depends entirely on what area you decided to buy in. You
always want to buy a property that is somewhere around 'the average' or
'typical' property in that area. Why? Simply
because you want everything to be as easy as possible.
Imagine trying to rent out a brand new mansion in a lower
socio-economic area. You will find it very hard to find a
tenant who will have enough money to pay the high rent of a mansion ,
yet be happy to live in that area. Also when you are getting
your property revalued the banks use 'comparitable sales' to decide how
much your property is worth. In other words they look at
similar properties in your area and what price they have recently been
sold for - If there are no comparitable sales the banks become very
reluctant to give you a favorable valuation.
So I would recommend trying to establish what sort of rental properties are the most popular in your chosen area and start focusing your attention on that sort of property. Anything from a 1 bedroom unit to a family home can be a fantastic investment, just make sure you get the right place in the right area.
So that's the basic plan of attack, next we need to look at how we can get a bank loan so we can actually buy the property. We will cover this in Chapter 2. - Getting Your Finance Pre-Approved