6 budgeting tips for first-time property investors (eBOOK)
So you’re ready to delve into the wonderful but sometimes complex world of property investment, huh? Great! But before you dive right in, there’s several things you should consider.
Firstly, you have to develop a budget that is a) sustainable and b) realistic.
Budgeting is obviously vital, and follows a simple premise – spend less than you earn. Simple, right?
Balancing your income and expenses ensures you take a positive, proactive approach to building and managing your property portfolio, and helps you remember to treat it as a business.
Our six budgeting tips can help you attain your first property investment, which can be the foundation on which you build a successful portfolio and financial future. Here they are:
1. Set goals
Sounds obvious. But the first step of budgeting for property investment should be to set goals – both long- and short-term.
Goals help you consolidate your knowledge and experience, while providing the focus you need to maximise your property investment journey to achieve long-term, sustainable wealth.
Establishing long-term goals is critical because it puts your first property investment into perspective with your other life goals and priorities, and influences the general strategy you should follow to achieve them.
For example, you need to consider if you want to purchase property for long-term capital growth or positive cash flow.
Short-term goals means those achievable within a year or less. But, like anything, you need to be flexible and ready to modify your goals and/or set new ones along the way.
2. Know your borrowing capacity
Again, it might sound simple, but knowing your exact salary and income underpins the framework for your budget, which will determine your borrowing capacity.
You need to know both your:
- Gross salary – what you earn before tax
- Net salary – what you earn after tax
Miscalculating this seemingly obvious step can easily distort your budget, and, therefore, borrowing capacity.
Your borrowing capacity takes into account what you can afford to buy, based on:
- Estimated repayments
- Interest rate
- Repayment type
- Loan term
- Loan type
- Your debts/expenses
- Your income/asset
3. Research the property
Research the property and conduct due diligence. Engage a professional to conduct a thorough investigation of the property to ascertain any issues or potential costs you may not have considered, and therefore incorporated into your budget.
It is worth the investment – it could be the difference between a small fee now and potentially huge costs in the future.
If the due diligence reveals there are repairs needed, incorporate a short-term maintenance plan into your budget.
4. Research the market
You should also research the market to analyse the property’s value and performance against comparable properties.
This ensures you are up to date with price fluctuations and property market cycles. And this means you will gain valuable knowledge to help you invest in areas with strong capital growth.
5. Understand all the buying costs
Buying an investment property is not just about the purchase price. Be aware of both upfront and ongoing costs when considering your property investment purchase.
6. Modify your budget
Once you’ve set your initial budget, review, review, review it. Things change. Things pop up. Like unforeseen costs. Or, an unexpected salary increase. Monitor it and adjust it accordingly.
Remember, it’s a journey. Property investing involves a long-term strategy. As you build equity, you can start the next phase of your journey and add to your portfolio.
That’s it! Six quick insights to set you on your way to becoming a savvy property investor.
If you’re already contemplating how to tackle the property market, and like to learn more about property investment in Perth, why not read our free Get Ready to Invest in Property eBook.
It guides you through five simple steps to help you understand strategic property investment and how to make it work for you. Whether you’re a first-time investor or re-entering the market, it will help you navigate the sometimes complex world of property investment and associated issues you need to consider.
You will learn how to:
- CREATE YOUR WEALTH PLAN & INVESTMENT STRATEGY
- ASSESS YOUR FINANCIAL POSITION & FIND THE RIGHT LOAN
- RESEARCH THE MARKET & CREATE A SHORTLIST
- MINIMISE RISK & CONDUCT DUE DILIGENCE
- ADD VALUE TO INCREASE RETURNS
It will then give you a few insights into GETTING STARTED.
So if you’re ready to learn some great insights into getting started in property investment, download your free Get Ready to Invest in Property eBook here.
Do you have any of your own budgeting tips? Let us know in the comments below.