While property is often considered a low-risk investment, the variation in returns and risks among different property investment strategies could translate into as much an additional million dollars or more over a 10-year period, according to Property Investment expert Richard Sheppard.
To enhance your chances of successfully building a high-performance property portfolio with minimal risk, consider these six essential steps:
- Education
Make a concerted effort to prioritise your education. Whether by reading pertinent books or taking part in a personalised workshop or seminar, equip yourself with the knowledge needed to make informed decisions and kickstart your journey into property investment.
Furthermore, take the time to understand the different types of advisers and their roles. Recognising who can provide the most beneficial guidance may be more critical than delving into the intricacies of the process itself.
- Property Advice
When embarking on your property investment journey, consider enlisting the expertise of a qualified property wealth planner. While financial planners excel in offering advice on financial products such as managed funds and insurance, a property wealth planner specialises in the intricacies of property-specific investments.
As property investment advice is currently unregulated in Australia, it’s important to distinguish between spruikers offering subpar advice and wealth planners providing high-quality guidance. A reputable property wealth planner can seamlessly integrate advice from financial planners, mortgage brokers, lawyers, and accountants, ensuring a cohesive approach to your overall financial well-being.
- Research
Thorough research plays a pivotal role in optimising returns in property investment. Trusted sources like Oxford Economics Australia can provide independent and seasoned economic insights to help identify high-growth markets. While this research is invaluable, it should be viewed as the initial step in the advisory process.
Macroeconomic research is instrumental in pinpointing the ideal city or region, integrating strategies for diversification and land tax minimisation. Microeconomic analysis further refines the selection process down to a specific town or suburb, ultimately leading to the identification of a property that aligns with demographic demands and suits your individual investment strategy.
For example, over the last decade, the property markets in Darwin and Perth have outperformed Sydney by approximately 100 per cent. Investing in these markets could potentially have yield around $1,000,000 more equity than investing in Sydney.
Step 4: Strategy – The Roadmap to Success
A comprehensive property investment strategy includes considerations such as optimal leverage, purchase price, ownership structure, buffer amount, cash flow management, tax minimisation, diversification, revaluation, and acquisition timeframes.
Navigating this complex process to optimise your property portfolio can be both challenging and time-consuming if attempted independently. Seeking professional advice is highly recommended to efficiently tackle this complexity and enhance the performance of your property investments.
Step 5: Risk Management
Property-specific risks encompass various factors, including interest rate increases, tenant vacancies, property damage, market risk, and strategy risk. One significant yet less obvious risk is the potential loss of employment income, which might necessitate selling a property prematurely before it has had sufficient time to appreciate in value.
Insurance is crucial for mitigating many of these risks, making it a critical consideration. Research and professional advice can also substantially reduce market and strategy risks.
Tip: Strike a balance between managing risks and evaluating the cost of missed opportunities.
Step 6: Action and Implementation
While it’s impossible to know everything, there comes a point when you must decide that your strategy is sufficiently sound to implement and take the plunge.
If you’re still grappling with certain concepts or require more research, seeking professional advice is advisable. Postponing the execution of a property investment strategy could result in significant opportunity costs. The average weekly growth of a $500,000 property is approximately $1,000, and each week of delay compounds these costs, underscoring the importance of timely action. Access valuable assistance and information, prioritise your strategy, and steer clear of procrastination for a successful property investment journey.