Strategies for successful real estate investing
Whatever form your real estate investment takes, certain strategies will stand you in good stead. Before getting started, establish an emergency fund, pay off consumer debt, and automate your regular savings.
Be financially prepared: Real estate is a particularly expensive investment, so you need to have cash on hand for a deposit and to cover cost associated with purchase as well as knowing your approximate borrowing power.
You'll also need a reserve to dip into if and when something needs fixing, which should be entirely separate from your everyday emergency fund.
Get to know the local market: There's an old saying: "The three most important factors in real estate are location, location, location." Start by getting to know the local market. Talk to real estate agents and locals; find out who lives in the area, who is moving to the area, and why; and analyse the history of property prices.
In short: Do your research and focus on building relationships with local real estate agents — because that's how you can get access to properties before they are listed on realestate.com.au.
Keep it simple: A simple strategy can go a long way in real estate investing. If your goal is to generate passive income long term income to fund your retirement, don't be fooled into believing you need to go big to make it happen. It's best to start small and keep your expenses low.
The financial takeaway
Real estate investing may be more accessible than you think, and there are multiple ways to get involved in this often-lucrative asset.
Pure investment plays — which don't involve hands-on management from you — include real estate crowdfunding, investing in real estate joint ventures, and buying into real estate investment trusts (REIT). Each of these mitigates the risk of investing in a major project alone or without guidance.
More direct investments, like buying your own home, a rental property, or a property to fix up and flip, are also valuable strategies. However, it's best to do your homework before settling on one of these ownership methods, ensuring that you're financially secure enough to take on some risk and familiarizing yourself with the local real estate market.
Investing in real estate can offer individuals both immediate income and long-term appreciation.
Bear in mind real estate as a whole is a relatively illiquid asset. Projects can take a while to execute and to pay off. So, whenever you think real estate strategies, you almost always have to think of it as a long-term investment play.
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This article does not constitute advice; readers should seek independent and personalised counsel from an appropriate trusted adviser that specialises in property, a tax accountant and property or interior design specialist.