The 5 Key Points to Stress Free Property Investing
At the end of the day, everyone wants a roof over their heads. Nay, everyone needs a roof over their heads. Why else would our ancestors scurry about in caves? It’s engrained into our genetics to be safe and have a place to go sleep and revitalise.
This is what makes property less volatile than other investment options. It might not be as easy and fast to sell off as shares or stocks, but you will always have a buyer ready should you ever need to sell up (assuming your investment is looked after and not an actual hole in a cave).
For these reasons and many more real estate is a “no brainer” when it comes to creating long-term financial stability for the majority of investors. It is a forgiving commodity that suits people from all walks of life and doesn’t require a master’s degree to ensure monetary success.
Choosing the right property to invest in comes down to the individual however. What financial status do you have, what skill sets, are you available for the day to day or the occasional mishaps? These are all things one has to think about before committing and all things you should have an internal conversation about in order to know what you’re personally comfortable with. We’ve put together our 5 key points to stress free property investing to help you understand what you need to do to take that first step. So if you are looking for how to lower the stress on investments, consider the following.
1. Know thy self.
Before anything, before even looking for a property, take a step back and really look inward. Only by understanding what type of investor you are can you have a clear image of what your investment goals are. We see people on a regular basis that bite off more than they can chew, or simply get lost in the heat of the moment. So before you jump into what you might believe is the next big thing. Take a moment. Have an internal conversation. Look at the patterns in your life.
Are you proactive, do you enjoy a challenge, were you the one to always clean up and pay the bills while flat sharing during your Uni times? If so, then maybe you can take on more responsibility and manage a portfolio and property by yourself. And might enjoy doing so.
Or are you the type that likes to be able to go out, have fun, and stress about bills at the end of the month when they’re due. Do you take comfort in knowing that the cleaner that comes once a week will get rid of the mess produced from the night before? Well, then maybe a more managed property investment is for you.
There is no right or wrong, but knowing what type of person you are is the first step in understanding what type of investor you are. Know what your objectives are and find a property that fits your goals. If you are after a low maintenance property and feel more comfortable knowing someone else can deal with the everyday nitty gritty, look at an investment that reduces the ongoing pressure of managing tenants and maintenance. For example, student property, which is known for reducing headaches with their rental management companies in place.
2. Be realistic and have a financial goal
“Fail to plan and you plan to fail.” Our plans may not always go exactly how we envisioned, but they do provide some guidance as we journey through life.
Our plans should be based on individual goals and objectives – What do you want to accomplish? Where do you want to be in five, ten, twenty years time? HOW do you want to live in five, ten, twenty years time?
Establishing solid, attainable goals as a property investor is what sets you apart from those who succeed and from those who dabble and end up derailed because they have no idea how to get to their destination. And remember, be realistic. Don’t shoot for something you know is over the moon.
People are strong creatures of habit and often than not want to complete what they have started. Take the first step and physically write down what your goal is and look at it to remind yourself from time to time. Acknowledging it is the most powerful first step you can take!
3. Find the right location (a no brainer, right?)
This is one we find even seasoned investors struggling with. How do you know if the location is right? Which areas are in a bubble? Which areas offer long term stability? This can be one of the most challenging elements of finding the right investment property.
Do you play it safe, pay more, and go into a more saturated market where the biggest growth has already happened. Or do you take a slightly larger risk and look outside the bubble and invest in the new “up-and-coming area”? And how do you even know what the new up-and-coming area is?
The answer is simpler than you think; Research.
Any potential investors should learn as much as they can about an area and select one based on insights into the future and areas that offer longer term stability. If you have friends that live there, ask them how the area has changed or is changing. Read articles about the city. Look at businesses – are they growing there? Are more investing there? These are some clear signs of positive growth. Where businesses go, jobs follow. More money flows in and the city ends up happier. In turn they want to keep the wheel turning, because let’s face it – who wants to go backwards when they are finally going forward.
Don’t be too scared though. If your gut feeling is backed up by research then take the next step and find an investment company that can help answer any further questions you might have. Cities grow all the time; just make sure you are following where the growth is happening.
4. Money, Money, Money – Focus on your cash flow
Isn’t this the whole idea about any form of investing? The key to a successful investment is ensuring you have a consistent and reliable cash flow. No-one wants a long term vacancy on a rental property. It can really damage the overall profitability of your investment.
Check rental vacancies within an area and understand the benefits or limitations of each location. Don’t be duped by extremely high rent amounts, it doesn’t always translate into high rental yields! Look at the actual yield you receive after taking purchasing costs into account. Alternatively if you aren’t familiar or comfortable with being able to secure a stable rental income you can always seek out an investment option that can assure rental income.
5. Recognize the value of good tenants
An investment property’s value is essentially measured by its ability to generate income. So finding and keeping good tenants is obviously a high priority for investors.
Difficult tenants can cause serious damage and extreme stress for any property owner. Repair costs, unpaid rent, unpaid bills, and even refusal to leave the property. It can all be extremely taxing and take a long time to resolve even if you have a property manager in place.
Spend the time finding the right tenants, do background checks and be sure to know your rights and responsibilities. And when you find that tenant, keep them! It might cost you a new washing machine or the occasional plumber, but the long term rewards far outstrip the costs that would involve a tenant from hell. Not to mention the rental voids that can follow. So when you do find that gem of a tenant, treat them like gold, because at the end of the day they are the ones fluffing your wallet.
On the other hand, if you already know you are not the type of person with time for such things then that’s fine too. As long as you recognize that in the beginning and go for investments that can take away this hassle. Go for a property investment that has a strong management system in place. For example, many good student property investments require students to pay for 6 to 12 months of rent in advance. They have strong contracts that most of the time also requires guarantors. And wear and tear can also be included. In addition, students rent for a minimum of a year in some of the best locations, so you are pretty much set rent and location wise.
Property investment can be a very rewarding enterprise. It’s tangible, it can be passed on, and it can grow with you. And like we said, housing is a human necessity. And as long as it remains ingrained as a fundamental necessity for us, we will always have a strong affinity to it. Don’t let property investing intimidate you. It can of course be as hard as you make it, but if you’ve thought about it, researched your heart out, and still want to do it – then go for it. Just keep these 5 key points in your mind and stray true to yourself. When you realise what you are prepared to dive into on an individual level, you will find investing in property more enjoyable.
If you’re still wondering if property investing is for you, or have questions about student property, then why not check out our top 10 student property investment misconceptions. It might just help answer those lingering first questions!