Banjo Smyth

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 does ‘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

This entry was posted on Thursday, June 26th, 2008 at 12:26 am and is filed under Buying Real Estate, Investing - Where to begin, Investment Education, Step by Step guide, how to buy your first investment property. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.