Seven tips for beginning property investors

Today I want to offer the community seven tips for investing in property. It was a challenge to list just seven because there are so many that I feel I could pass on – and I am very much a “beginner” investor myself!

That said, I genuinely believe that beginners can offer some of the best tips and advice to the market, for three reasons:

1. Beginners make the most mistakes. It’s true!
2. They are always making the “freshest” mistakes, so their advice is usually the most current. For example; new first-home owners’ grant changes and lessons learnt for those undertaking new loans around these
3. As less “seasoned” investors, beginners are more likely to be outraged by little stumbles they come across along the way, versus experienced investors who are less likely to be vocal about mild stumbles. This is also probably because experienced investors tend to make fewer mistakes. Or if they do, they are more obscure mistakes, and ones less relevant to new investors. For instance, dealing with a builder pulling out of a 20-unit development at the last minute. I would not imagine many young aspiring investors to find themselves in any kind of 20-unit development issues!

But it is not all about mistakes, sometimes the best tips to pass on are ones learnt from personal innovation. So today I’ll draw from actual personal experience, mistakes, successes, and learnings that I’d made in the first five years of my investment career.

1. Choose an investment strategy (and stick to it). I’ve put this tip first, because it is probably one of the first decisions you need to make (After, of course, you’ve made the decision to explore property investment to begin with!). Choose a strategy that is as flexible as you think you’ll need it to be, and one that is akin to your personal risk profile. Some investment strategies to consider include:

1. Buy-and-hold. This is where you grow a portfolio of numerous properties during an acquisition phase, then hold on to them for at least two cycles of the property market (so, at least 15 years, but ideally longer) and sell off most of the portfolio gradually as you get closer to retirement age.
2. Renovate-and-hold. This is similar; you slowly acquire a portfolio of multiple properties over time but buy properties that are undervalued; do some cosmetic (or with more experience, non-cosmetic) renovations, then keep the property mid-long term, creating
3. Flipping. This is in effect buying undervalued property, renovating as per above and quickly selling for profit. A strategy best used for more experienced investors due to the high costs associated with buying/selling property quickly.
4. Property development. Again, more for very experienced and seasoned investors; this may be the area where some investors hope to end up in their career. Involves designing, building, selling (and/or holding) a development of units/townhouses etc from beginning through to completion.
5. Create your own strategy! There is no “right” or “wrong” approach, provided you have a detailed strategy documented from the beginning, with clear goals in mind.

2. Build not just an invaluable “crew” around you – but an invaluable “network” as well. Many experts and seasoned veterans are quick to write at length about building your “crew” around you (key accountant, solicitor, broker, financier, tradespeople, and mentors). While this is of vital important, my tip is to think beyond these immediate people’s value and think to your peers and like-minded groups around you. Think networking. Attend property investment seminars, shows, and talks.

Have logins to the key blogs and networking sites and read/post on them regularly. The good ones (Somersoft Forums, for example) will have threads on virtually every topic imaginable within property investment. Also, if you don’t already have one, get a LinkedIn profile and search for some great user groups/communities that are actually freely engaging and blogging on specific topics within property investment strategy. I’m a member of several Linked In groups and would recommend these ones for those starting out:

http://www.linkedin.com/groups/Investment-Property-Australia-New-Zealand-2916736?gid=2916736&trk=group-name

http://www.linkedin.com/groups/Real-Estate-Investment-In-Australia-2920696?gid=2920696&trk=group-name

http://www.linkedin.com/groups/PropertyWizz-Australia-2950747?gid=2950747&trk=group-name