According to Luke Harris of The Property Mentors, there is a lot of interest in real estate and the passive income it can provide, but it may be challenging for novice investors to choose where to put their money.
He also stressed the need of having the appropriate methods and industry expertise to make the process of building a real estate portfolio "from scratch" less burdensome for investors.
Here are the top 10 queries that might assist new investors (as well as seasoned investors) enjoy a hassle-free property investing journey, coupled with practical recommendations.
1. How can I begin investing?
While buying a home is relatively simple, Mr. Harris said that it is far more difficult to make sure that it would be financially successful and have long-term development.
The expert recommended investors to make sure they are emotionally, educationally, and financially ready before making a commitment to any property.
He began by outlining the necessity for investors to have confidence and leave their "comfort zone".
According to him, emotional preparation is having a clear understanding of and emotional attachment to your overall investing objectives.
However, it takes more than simply being driven to follow through. In order to avoid making expensive errors, Mr. Harris noted that this trust must be accompanied with the appropriate knowledge.
According to Mr. Harris, being prepared for school requires knowing which methods and attributes are appropriate in your situation so that you don't spend time looking for ineffective solutions.
Although it may sound like an old cliche to be financially prepared for a significant acquisition, he said that many investors fail because they ignore this element.
Not every property strategy needs a lot of money (although it certainly helps and does provide you with a wider range of options). You should, at the at least, make sure that your finances are in order, have a decent credit score, little to no bad debt, and a financial cushion, he said.
2. Which area is ideal for real estate investment?
Mr. Harris said that determining the ideal location for real estate investing requires a high level of knowledge and expertise.
He suggested that novice investors start by learning the fundamentals. The following factors should be taken into account when making an investment decision: population growth, supply and demand, stock and vacancy rates, and existing and future infrastructure. Is it near stores, hospitals, schools, and public transportation?" he asked.
A broad rule of thumb that novice investors may use was also provided by the expert.
"In general, the chance of stable or increasing demand is higher the closer and newer the infrastructure is. To ensure you're getting the most for your money, you also need to be aware of your market and your competitors, he said.
3. What kind of property makes the greatest investment?
Even seasoned investors continue to debate this age-old issue. But Mr. Harris suggested that novice investors take a look at three different kinds of properties since they are "great performers," in his view.
First, the expert advised considering residential properties that are brand-new or off-the-plan since they enable investors to accelerate the expansion of their portfolios.
He said that the home "can rent for a greater price, is reduced maintenance, has a guarantee, and gives tax depreciation advantages, enabling you to allocate cash towards purchasing your next property and expanding your portfolio."
Then, he suggested to inexperienced investors to think about purchasing an existing residential property since they provide a chance to enhance value.
It may be enhanced to increase value via refurbishment, subdivision, or development; in addition, it can be swiftly purchased, occupied, and leased, according to Mr. Harris.
Just keep in mind that tax depreciation advantages are diminished and that they might impair cash flow and hinder portfolio expansion when paired with repairs and maintenance.
Last but not least, Mr. Harris urged investors to go beyond residential properties and to consider commercial ones, which he says may provide the kind of financial security that most novice investors want.
Tenants often sign lengthier leases with built-in raises and extension possibilities, and [commercial] rentals are frequently higher than residential ones, he noted.
However, he also said that due to the industry's heavy reliance on outside economic variables, commercial buildings come with their own unique set of dangers.
4. How can I tell whether a property is a good investment?
Every property is unique, there is no universal solution to this problem.
Instead, he recommended investors to consider a variety of aspects, such as their own financial status, supply and demand dynamics, the kind of property, etc., to evaluate if an investment is sound.
He also emphasized how even little changes to a property might have a big impact on investment returns.
There are several aspects that may lead your home to increase in value over time, or decrease in value, according to Mr. Harris. "From design components like access to natural light and ceiling heights, to the quality of the building and the fixtures," he added.
5. Is rentvesting a wise financial move?
The expert claims that rentvesting might be a "wonderful technique" to take the first step up the property ladder.
According to Mr. Harris, rentvesting has many additional benefits in addition to allowing an investor to buy a home without having to give up their lifestyle.
To begin with, this investment plan enables the acquisition of a property anywhere in the nation where the underlying conditions are stable.
Additionally, he said, "buying a house in a more cheap neighborhood implies less cash up front, allowing you to enter the investing market earlier.
Further cash is made available to investors via rentvesting. Mr. Harris claims that renvesting enables investors to use their initial real estate investment to purchase more properties, therefore growing their portfolio.
In addition to these advantages, Mr. Harris emphasized that rentvesting enables investors to benefit from tax breaks including the ability to deduct income from investment properties.
6. Is using super to buy an investment property a wise idea?
One must create a self-managed super fund (SMSF) in order to purchase a home using their super, which Mr. Harris recognized may be a laborious procedure.
But Mr. Harris outlined the benefits of using super money to finance your real estate acquisition. Instead of a fund manager making choices on your behalf, "[you] may choose where your super is put. And if real estate is your passion, investing in property can be the best course of action, he said.
He advised checking at the guidelines provided by the Australian Taxation Office (ATO) for investors wishing to make investments via their SMSF in order to stay out of problems with the regulator.
In addition to establishing the fund, he brought out other monetary issues that should be discussed with a financial advisor, such as maintaining financial reserves, saving up for a larger down payment, and accounting for increasing interest rates.
7. Can I invest in real estate without first purchasing a home?
Mr. Harris said that there are other methods to invest in real estate and that purchasing a home is not the only option to get your foot in the door of the real estate industry.
He recommended investigating alternate real estate investment strategies such SMSFs, peer-to-peer financing, small-scale private offers, and wholesale investment trusts.
The expert said, "It all depends on where you are now, your circumstances, and where you want to go.
8. What constitutes a healthy rental income?
According to Mr. Harris, identifying a "good" rental income depends on a number of variables, and investors must always keep an eye on the rental market.
"You must keep abreast of neighborhood market circumstances and similar properties in order to maximize your rental revenue. This will be useful when talking about rental prospects with your property manager, he said.
According to him, if the rent is set appropriately, a landlord won't ever have to worry about receiving rental applications. "You can keep better quality renters if you are maintaining the property and being a responsible landlord," he said.
Additionally, he advised investors to prepare for the unexpected and avoid becoming complacent. If you don't modify your expectations, your property may end up lying unoccupied when the lease ends or your renter vacates if the market has cooled down, according to Mr. Harris.
The expert listed a few clever techniques to reduce the amount of time rental homes are vacant.
"By lowering your rent, you'll typically have a selection of renters and be able to find a tenant fast. A simple aesthetic upgrade may help draw in renters more quickly and provide more rental money, he said.
He also suggested that purchasing a modern home might shorten the time that it is vacant. "Newer homes may also command higher rents since renters are willing to pay a little extra to live in a better setting.
"That entails having sufficient heating and air conditioning, dishwashers, high-quality fixtures, and leak-free showers, toilets, and faucets. These creature pleasures would also be prioritized by tenants wishing to lease for extended periods of time, he said.
9. Long-term vs short-term rental: Which is the best strategy?
Investors wishing to create a profitable cash flow portfolio should think about listing their rental property on websites for short-term lodging to boost returns.
However, Mr. Harris recommended investors to establish prices wisely in order to succeed with this method.
"As a general rule, you should strive to double your base rent when choosing a pricing. Therefore, you should try to average $800 on the short-term rental market if you can get $400 per week on the long-term rental market, he added.
He did note that this tactic is not without danger however. "Cash flow volatility is [one] of the major hazards with a short-stay approach; you need a financial safety net to get you through lean booking times.
Additionally, he said, "you should consider the time needed in maintaining the property yourself vs hiring a professional to handle the process for you. Guests might damage your property, insurance can be pricey, and so on."
10. How can a good property manager be found?
Despite the fact that landlords may manage their properties independently, Mr. Harris said that there are times when hiring a property manager is the finest (and most practical) course of action.
"Having a top notch property manager on your team is a must have," he said. "If you have one property or more, or if you have older property that need higher maintenance, or if the property is situated in another country or state with different legislative requirements, or if your tenant happened to be a bit more troublesome, or there is an argument, or you're not sure how to increase the rent, or you going to find a new tenant.
The top rental value or more for an investor's investment should always be their first objective, he said, and that's where a competent property manager comes in.
A professional property manager is the only one who is in a better position to comprehend the situation of the market and suitable price, according to Mr. Harris.
So how can you locate a reliable one? Mr. Harris provided advice on how to choose a property management.
Look around, obtain rental assessments for your property (this should be free), find out how many properties they directly manage (the less, the more attention they can devote to your home), and find out whether they undertake their own property inspections or contract this out. said he.
In addition, he cautioned against bargain-hunting for property managers since, as with other things, you usually get what you pay for.
Finally, Mr. Harris urged investors not to lose hope if they make bad decisions along the road. It's really quite simple to adjust if you don't get it right the first time, he said.