5 Key Steps to Purchasing an Investment Property

By Michael Mackinven | Property

Feb 17

5 Key Steps to Purchasing an Investment Property

Purchasing an investment property can be very scary and exciting at the same time.

If you have never purchased any type of property before you are embarking on a great wealth creation strategy that could potentially make you thousands of dollars, but I recommend you educate yourself as much as you can before purchasing any investment property.

If you have purchased your own home before you would have purchased with a lot of emotion because it’s a property you and your family will live in. But when purchasing an investment property you need to go on the numbers not on emotion.

Take your emotions out of an investment property deal and focus on the numbers and the long-term strategy you have for that particular property.

Keep in mind all the time that the number one rule of thumb in purchasing an investment property is make sure you buy well. You may have heard the saying ‘You make your money when you buy’. If you don’t this can cost you in the long run.

It’s also important to not only make sure you are happy with your purchase but the vendor is also happy with the deal so that it becomes a win/win for both parties, this is not about ripping someone off.

5 Key Steps to Property Investing

Step 1. Finance

Unless you have plenty of cash ready to buy getting finance will be your main priority to see whether you can actually purchase a property and up to what value.

You can either go to your current bank or use a mortgage broker as they tend to use a range of banks to find the best package for you. Don’t be disheartened if you go to your bank and they say no. Go to the next bank and so on until you find one that will help you.

Step 2. Focus on the type of property you want

It’s important before any work begins that you know what type of property you are looking for.

  • Is it a do-up or one that you can rent out straight away?
  • Will it be a 2 bed unit or a 3 bed house?
  • What is the size of the section?
  • Does it need a garage or carport?
  • Do you want to develop in the future?
  • What area do you want to purchase in?

You need to be clear on this so that you can focus your energy and resources. You don’t want to be searching through all the property websites with no clue on what city you want to buy in.

At the same time agents will be asking what type of property are you after. By being specific you don’t waste their time coming up with deals you don’t want. Be efficient with your time and others.

Step 3. Understand what stage of the property cycle we are in

Understanding the property cycle is crucial to purchasing a property.

If the market is hot (which it has been up until mid to late 2016) you need to be prepared to act quickly and decisively and you will need to offer a good price.

Discounted properties are harder to find during a boom market, so it’s a matter of making sure you find good true value properties.

Right now the market is slowing or stagnant, so you are able to take your time. Properties are staying on the market longer which means vendors become desperate to sell.

This enables you to negotiate and reach a settlement with a discounted price. Also because there are more properties on the market your range of properties to choose from in your area are far greater. Hence take your time, the deal of the century comes along every week.

Remember keep your emotion out of it, focus on the numbers.

Step 4. Due-diligence

You can not underestimate how important doing your due-diligence is, because otherwise you will be throwing away thousands of dollars and it could also limit the number of properties you can buy in the future.

If you are looking to invest in an area you are not familiar with it may take several months of research to understand that particular market. If you already know the area and market you want to invest in then the due-diligence time frame will be less.

Talk to real-estate agents, property managers, pound the streets in your car and research property websites in your chosen area. Gather as much information as you can, the more you are armed with the better the decision you can make before putting any offers forward.

Step 5. Time

Take your time, it’s so important that you do not rush the process especially if you are new to property investing or have a very small portfolio. It may take you a whole year to purchase a property and or at the same time a few years.

You need to have the right mind-set, education, focus on your own goals and not to be distracted by other investors that are purchasing property.

Your circumstances are completely different to any other investor. You are investing for the long-term (buy and hold investing) so the decisions you make now will affect the long term outcome of your purchase.

Enjoy the process of purchasing an investment property as this will be one of the biggest purchases you make in your life.

It’s an exciting journey and that you will reap many rewards by following the above steps.

Also a big part of property investing is making sure you have a great alliance team you can rely on which can consist of a mortgage broker, accountant, solicitor, property coach and property educational books.

You don’t have to know everything but the things you don’t know you need to make sure you have the right person in your alliance team to turn to.

I wish you all the success with your property investing.

We still have seats available at our current event ‘3 Step Secret to Property Wealth’ in Auckland and Hamilton go here to find out more and get yourself educated.
Time for Property Investing

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About the Author

I have been a property investor for over 13 years and have created a multi-million dollar portfolio including residential and commercial. I could go on about this but I’m not here to impress you but to impress upon you that YOU TOO can create wealth through property whether that be $100K or $5 million. I’ve been through the boom – bust – boom so I know what it takes to stay in the market. I live locally in Otahuhu with my wife and new baby boy. I love to help and teach people about buying well and for long term. We can all make a quick buck but the real strategy is creating long term wealth.