The obvious starting point when it comes to property investing is that you have to have a fair bit of cash in your bank account. I will talk about the various ways you could achieve that in other posts so this post assumes that you already completed step 1.
How much do I need?
The amount of money you need depends on the property market that you want to invest in. For example, you may live in a small coastal town and you can see obvious signs of your town getting a lot of traction so it would make sense for you to buy a property in the area that you know well. Especially considering that the properties in a small town are most likely much cheaper then getting a property in a large city.
Unit or house?
Once you selected the area that you want to invest in, you need to decide whether to buy a house or a unit. This one is an easy one to answer if you understand that land appreciates while building depreciates. What it means is that when you buy a unit then the portion of the land that's built into the value is significantly less than the portion of the land in case of a house. So if you buy a unit and the land component is only say 15% of the total value then 15% will go up in value while the remaining 85% will diminish in value (the building gets older).
New or existing?
This question is a bit more complex to answer as both options have it's pros and cons. If you buy a new building then you will enjoy great tax benefits through depreciations. However, on the flip side, you would most likely pay a premium for the developer/builder to erect a house on the given land. If you buy an existing house then you will have higher maintenance costs but you most likely end up with a land that's bigger and better positioned than getting a land in a new estate.
You might think: Okay, I get this. This isn't news to me. Can you really tell me where to start?
The answer can be summarised in two words: land and strategy.
Land
You must understand that when you buy an investment property then you buy a piece of land of the roughly 510 million square kilometres that is available to us. Once you truly understand this then your whole perception about properties will change. The structure that sits on the piece of land that you're eyeing is just a vehicle to finance your land holding costs.
Strategy
Because of the importance of land and it's position it is critical that you have to have a clear strategy in mind. If you just buy a piece of property that you can afford then you will really limit your growth potential.
This post is really just touching the topic of property investment as I will explore each point in far more detail in other posts.
Hi Peter, whats your thoughts on borrowing as much as you can (stretching) in order to get a better PPR. I use to be more conservative when it comes to money but I have since learnt that sometimes its better to go in hard. Ideally we would like to get a place where we could rent out a room to aid in the loan repayments.
Cheers
Chris