Turn a Gamble into Science
In past articles I have covered some of the basics of planning and making sure your financial foundations are set up before you begin.
Today, I am going to dig deeper into the process specifically relating to making a purchase decision around property investment.
Since 2004 I have helped more than a few people with their property investing and what I am going to share with you is the process we take our clients through.
It usually starts with a client telling me, they think they’re ready to buy an investment property.
I will then say, “You have an IDEA you want to invest, and you need to FIND a property.”
“Yes, that is correct” says the client….
To do this well you need to turn a Gamble into Science, so remember this:
Use your IDEA…
I – Income plan
D – Debt reduction plan
E – Exit Strategy
A – Asset protection
F – Financials
I – Infrastructure
N – Numbers
D – Demographics
…The right property for you with the best potential for performance.
Keep that in mind when you are thinking about your next purchase.
I know I always rave on about having plans and planning for the future.
Surprise surprise, this is no different.
Without making this scribbles longer than the Nullarbor, let’s breakdown your IDEA.
– Personal income (work etc)
– Asset income (rent)
– Investment income
– Retirement income
Include all forms of income to support your investment activities, lifestyle, and your plans for income now and beyond.
Debt Reduction Plan
– Pay down investment loan?
– Save in offset?
– Pay off home?
You need to outline what you are going to do for the investment debt and if money is left over (positive cashflow) then what will you do with that.
– Who will want to buy when I sell (target market)
– Can I make it easier to sell (appeal)
– Can I sell in parts (liquify)
Always need to know how you are going to get out of something you are buying. Make sure you consider the exit, BEFORE you enter.
– Am I high risk, medium or low risk
– What is my exposure
– Complication vs structure cost vs tax benefits
– How do I want to be able to transfer ownership or income/gain
Let’s face it, you are buying a many hundreds of thousand or millions of dollars of asset. You need to make sure it (and you) is protected.
Now lets FIND the right deal
– Your ability to fund
– Amount needed to borrow
– Amount bank will lend
– Cash needed to buy and settle
– Who will rent your property
– The tenants ability to pay
– Stability of their income
– Depreciation and Tax
The financials are the important part. Some of them you may know before you go shopping, and some are specific to the property.
Get it right and write it down.
Roads, hospitals, shops, schools, jobs, etc
Community groups, gyms, childcare, sports, churches, etc
Both visible and invisible infrastructure are super important. You can have nice roads and no community connections and the place will be a ghost town.
– mean, median, average etc
Target property price and yield
– Yield = rent / price x 100 etc
Different to finance, this is the numbers that relate to the property/area/region and based against similar property/area/region.
Demographics and Data
– Who needs to live there
– Who wants to live there
– Who is able to live there
– Demographic changes
• Australian Property Monitors
• Public sales data
Know your area’s market and demographics. Use paid and free data reports to become an expert in what and where you are buying.
IDEA and FIND
Use these tools next time you are considering buying a property and turn a gamble into science.
Better yet, call me and we will help you successfully and strategically plan the right outcome for your financial future, using property for superior results.
Since 2004, Scotty North has been helping people buy the best properties for their needs at prices that simply speak for themselves.
Scotty has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model.
Scotty North is a Qualified Property Investment Advisor (QPIA), with accreditation’s in financial planning, mortgage broking and real estate.
By carefully considering his clients’ goals and planning for market changes via demographics and trends, Scotty designs a future proof outcome not only specific to the client’s needs but dynamic in its execution with performance indicators and exit strategies built in.
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- Starting with Good Foundations
- A tool to navigate the market – RPA Compass
- Property Advice for Real People
- Watch the Worlds Tallest
- Swiss Army Knife of Property
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