Richard Sheppard is the Managing Director of inSynergy Property Wealth Advisory.
Property is a topic on which most Australians have a strong opinion. But how many really know how to methodically and consistently manage property as a successful investment?
Historically, residential property has proven to be a safe and strongly performing investment choice in the medium to long-term. That is if it is approached with purposeful, unemotional and methodical investment strategies.
Successful property investment is something most Australians can achieve. However, to optimise the return and lower the risk from property investment, it is important to understand the processes involved. I like to call these particular processes the six steps to property investment success. They are:
- Education
- Research
- Strategy
- Risk Management
- Advice
- Action and implementation.
Each step is important on your journey to property investment success. In the next six editions of Peninsula Living magazine, I’ll discuss these steps in detail and explain why it is essential to complete each step before you buy your next investment property.
Step 1: Education – The power (and profit) of knowledge
Whether you already invest in property or are simply thinking of investing in property, the first step is always self-education. Spend a few hours each month to understand market conditions, economic climates and your personal financial situation will help you make informed decisions on ways your money can work for you.
Advisers
While it is possible to find a good adviser and blindly follow their advice, you run the risk of not necessarily being on a plan that is right for your situation. There is also the risk of being taken for granted by someone who may be more interested in their own returns than yours.
When choosing your adviser, meet with a few different ones to get to know their capabilities and experience. It is important to appoint someone with whom you can create an ongoing, long-term partnership – someone you feel comfortable with and trust. It is preferable to also find someone who is both a property investment adviser and a financial adviser – as many are not. If this is not possible, you should consider choosing two advisers – one who specialises in financial planning and the other in property investment.
Always make the effort to understand the basis of your adviser’s recommendations. Doing so will give you the knowledge and confidence to make wise investment decisions – especially important when there are large sums of money involved.
A good adviser should be willing to spend time educating and showing you where to find further information, should you wish to learn more about their business or strategies.
Reading and seminars
It’s not necessary to spend a lot of time attending investment courses and burying yourself in textbooks. While it is good practice to attend some investment seminars, there are plenty of good investment magazines and websites you can subscribe to. Take the time to read them and update yourself on current market trends and strategies.
Back to basics
One of the most powerful aspects of property investment is to understand and apply the principles of compound and simple interest – something most of us learnt in high school. Take time to refresh your memory of how these concepts work. It will remove much of the fear many of us have about debt by being able to understand the differences between ‘good debt’ and ‘bad debt’.
Next month, we will look at the second step to successful property investment – research. We’ll identify the most effective sources of information to help pinpoint the locations that offer the best prospects for growth.
* Please note: while property should be a key ingredient to many investors’ portfolios, it is just as important to balance your portfolio with a mix of other assets (such as shares). We also recommend protecting your wealth with appropriate insurance. You should always obtain advice from the relevant industry professional, such as a mortgage broker, property investment adviser, financial planner, accountant and solicitor.
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