3 key things to consider before you invest in property
Buying a property simply involves signing a contract and getting a loan, right? Yes, to an extent. While I’ve learnt that the actual act of buying property is easy, investing successfully and achieving sustainable long-term results is the hard part. So how do you know you’re ready to invest success
Buying a property simply involves signing a contract and getting a loan, right? Yes, to an extent. While I’ve learnt that the actual act of buying property is easy, investing successfully and achieving sustainable long-term results is the hard part. So how do you know you’re ready to invest successfully?
There are three fundamental components to being truly ‘ready’ to invest in property, which I refer to as ‘the three stages of readiness’.
Each of these three stages is vital to acknowledge before going out into the marketplace, and you can’t bypass any level if you want to get the very best results from your property investment strategy (yes, you should have a strategy).
You don’t need to be 100 per cent ready across every area, but being aware of the stages and how they can impact your results is extremely important.
Being emotionally ready
Yes, emotions are important when it comes to successful property investing; and I’m not just talking about your emotions taking control or trying to remain objective throughout the property selection process.
Let me explain. Most of us, no doubt, would love to attain at least some level of financial freedom and independence.
The problem is that simply wishing for financial success does not make it happen, and what many people are not so good at doing is putting in the time, energy and effort to clearly define and then realise their goals. Methodically, step by step.
So how do you overcome this? You need to objectively define and be emotionally attached to your overarching investment goals, because there will be times when you’ve had enough and will want to give up.
Being emotionally ready means you’re connected enough with your end goal to overcome your doubts, move out of your comfort zone and move forward with your strategy.
Being educationally ready
With investing, education must always come before results. There are all sorts of tactics out there for investors to try, but which ones actually work? It’s all too easy to jump from one single investment strategy to another without having a clear overarching plan.
As with being emotionally ready - and so you don’t waste your valuable time chasing down tactics that are irrelevant - your education must relate back directly to the specific goals you wish to achieve.
This means you don’t have to be an expert on everything property before you’re ready. Essentially, you need specific education rather than broad-based education that may not be directly relevant to your circumstances.
This not only saves you time on background research, it allows you to reach your goals efficiently, without being distracted, and it also saves you from making costly mistakes.
Being financially ready
This one is superficially obvious, and of course you need to be financially ready to get into the property market and start investing.
However, this is also likely the only area the average investor will actively consider, while I place it third on my list for successful investors.
Every investor needs some capital to work with, but it’s worth noting that not all property strategies require a lot of capital (although it certainly helps and does provide you with a wider range of options).
You also need to ensure your financial house is in order, have a good credit score, little or (even better) no bad debt, and a financial buffer.
But think about this, while most people can state off the top of their head what their physical weight is to within a few kilograms, far fewer can state their ‘financial weight’ to within a few hundred dollars. Why is that?
It’s because they don’t have a well-established money management program in place that can not only help them better manage their financial affairs but also cause them less stress. And, luckily, good money management habits have nothing to do with how much income you earn.
With the help of appropriate professionals, virtually anyone can become financially ready to invest.
But you need to learn to analyse, understand and control your current levels of income, debt, equity and superannuation to determine what you can safely afford to invest with, right now and into the future.
Sometimes, you need to slow down in the short term in order to speed up over the long term, and not try to fast-track the process!
Building long-term sustainable wealth is not a sprint: it’s a marathon, and the work always comes before the results.