Everyone loves talking about property investing, and for good reason. There are just so many success stories of Australians who have built their wealth via the property market over the last 50 years. Property investment is a reliable way of creating wealth, securing a comfortable retirement, and achieving your financial goals. What people don’t tell you, however, is that a good knowledge of finance is the key to turning your property dreams to reality.
But perhaps you are not sure how to access or utilise the finance needed to acquire a property. What then? Let’s discuss some tips that will help you approach finance better, understand how it works, and get you into your first (or next) property.
Tip #1: Start with the end goal in mind and a strategy in place
If you’re looking to buy your first home, you’re going to have a very different strategy for someone who is looking to buy a number of investment properties. If you don’t have the right strategy in place to achieve your particular end goal, then you simply won’t get there.
Tip #2: Understand the way banks assess lending criteria
No one is buying a property with their own money; they’re all using the bank’s money. If you want the bank to give you their money, you need to understand the criteria that they look for in a potential client. All banks will have different criteria, but here are two of the key things that they look for:
They want to make sure that you have the cash flow available to service the debt. If you’re a business owner, there are two layers to this. The first layer, the lenders want to understand how well your business is performing and how much profit you are banking. Second layer, they want to understand your personal income and expenses in your household, outside of business.
They want to make sure you have equity to contribute towards your purchase. If you’re a first home buyer or a first-time investor, they want to make sure that you’ve got either cash or capital to use as a deposit. If you’re an existing property owner, they’ll want to make sure that you have the equity available in your existing home/investment property to move on up the ladder.
Tip #3: Buy the right property for you
This is subjective and will depend upon your own particular situation and objectives. When buying a home, you need to buy the right one for you, and this will ultimately be a lifestyle decision. When you’re buying an investment property, buy one that fits with your investment strategy. If you’re after capital growth, for example, then you don’t want to buy a property that won’t go up in value, because then all it will do is slow you down and keep you from achieving your financial and lifestyle goals.
Getting into property is a complex process. If you want to learn how to be a better business owner and actually achieve your property goals, join us at Your Lifestyle Business Community! We’ll see you there.