MOST real estate is bought with the heart rather than with the head.
That’s fine if you’re buying a dream family home, but if you’re a property investor it’s your noggin that’s needed most.
Investors must think differently than a typical home buyer. All their decisions need to be made with a view to making the most profit or income on the property, rather than impressing their mates or relatives.
Here are five ways to put the emotional stuff behind you and think like a hard-nosed property investor.
1. The old saying about buying the worst house in the best street is a load of garbage. You don’t want to buy a property that needs months of renovations before tenants move in and start paying you an income. Unless it’s your investment strategy to do up dodgy homes, aim for something that is low maintenance and will be attractive to tenants.
2. Be bland when buying. There’s little room for fluoro orange feature walls in an investment property. Neutral colours will make it much easier to rent out because as furniture can easily be matched. Remember that you’re not buying an investment property to suit your own tastes, but something that will be tasteful to most of the population. The average tenant won’t pay a lot extra if the home has a spectacular water feature and swimming pool in the backyard.
3. Match the property’s location with your prospective tenants. If your target tenants are likely to be students, make sure it’s close to public transport. If it’s a family, there should be schools nearby. It all comes down to researching the area and trying to understand who lives there and the services they need.
4. View it as a business. This one comes from author and buyers agent Patrick Bright, who says investors should evaluate their property every six months and ask the tough questions. Does it need extra investment in renovations or improvements? Do the tax benefits still work for you? Are you still getting the best finance deal? Is it delivering you the best possible investment return? Real estate investment is not fire-and-forget.
5. Have a long-term plan. Most of us don’t have a long term plan for what we will do with our own home (that said, we still tend to move every five or ten years and pay exorbitant stamp duty costs when we do). But an investor needs to think about their exit plan before they buy, and write down that plan.
Property investments will cause headaches and go through flat spots like now, but if you treat it like a money-making purchase and remove emotion, dealing with that will be much easier.
