When considering investing in property it’s essential to think carefully about why you are doing it and why you are choosing to invest in property over any other options. There is a lot of media coverage in many countries about the process and benefits of property investing and it’s certainly encouraging to a lot of people, however there are many questions that you should be asking yourself before heading down that path. One of the things I talk to people a lot about is to be ‘cautiously receptive’ of other people’s advice (including mine as well) and when you start telling people that you are thinking about buying an investment property you’ll be surprised at how many people have an opinion on it and plenty of advice to go along with it.
Ultimately, you are the only one that can decide if it’s the right option for you and your circumstances and this requires every potential investor to hold up a mirror and ask themselves some questions. Here are a few prompts that I found (and still continue) to find useful when considering buying a property for investment.
- What do I want to get out of investing in property? Am I approaching this as a long term investment that I’m happy to maintain for years to come, or am I dong this for some fast returns?
- Am I aiming to establish a portfolio of properties or am I going to buy one property for investment? If I’m aiming for multiples, how do I do that?
- Do I want my investments to eventually be my primary income? Am I aiming to have it as a ‘retirement fund’ or eventually extra spending money?
- Will I be disappointed if it takes a long time for me to see some positive cash flow from my investment? What if it starts off losing money?
- Examining my finances, am I in a position to invest in property…realistically? Have I been putting off investing because I think I may not be able to do it financially?
- Do I want a ‘set and forget’ investment or am I prepared to put time and energy into my investments? I think this question is very important to be able to answer as property can end up being either of those things.
- How much do I know about being a landlord and how much time am I prepared to put into the process of learning about it?
- Am I realistic about how I would manage if something goes wrong? What about if my income drops, if my family circumstances change, if I need to pay for major repairs or if I have issues with a tenant?
These questions are just a starting point for things to think about and all before you have been to an open for inspection. Often the first thing people will do when thinking about property investment is to go looking at properties and quickly fall in love with their dream investment. My view is that this can often be the first mistake in a long line of potentially costly steps. Remember, this is an investment and you need to be clear about what you want to achieve before you find yourself signing a contract of sale! Yes, it’s not the exciting part but it is essential. Being clear about your goals through investment will be one of the best first steps you can take and will certainly help pave the way for a successful journey. Try not to be put off by it, sometimes it’s challenging to put the brakes on and ask yourself such questions and you also need to be prepared to deal with your answers. If you don’t like what the answers are then it means that you need to do some more work before you get out there buying a property. It’s entirely worth it though so persevere!
If you are starting to think about investing or already are, what are the questions that you would recommend? What have you found useful to consider? Add them below!