Why is it that so many people do all the research into buying an investment property - but then don't finish the process?
It is actually the fear of becoming a landlord. Let me explain.
They have all the best intentions, they know the properties they like, the hotspots to look for and they even attend seminars and do courses.
But then they stop.
You may find this baffling but after 35 years helping people through the process, I can tell you what stops them.
Sometimes its the obvious things but these are never the main reason:
Even though there is overwhelmingly positive evidence that property as an asset class grows in value, what is it that ultimately stops these would-be investors?
The biggest reason is FEAR OF BECOMING A LANDLORD and all that goes with it.
As you can see this is not a moral or social fear, but a financial one.
The fear is real but the reality is not.
In the overwhelming majority of cases, tenants do the right thing because the accommodation you are providing is their home. A good tenant will treat the property as if it’s theirs, and they’ll grow connected to the home and stay as long as it suits their needs.
How can you minimise this risk
The obvious and best short term way to overcome this fear and minimise any risk is to buy a property with a RENTAL GUARANTEE
In summary, these will guarantee your rental income and ensure peace of mind with your new investment.
There are some good and there are some not so good rental guarantees on the market so make sure you understand the terms and costs before deciding if this is the right route for you.
However, if you decide to buy an investment property that does not have a rental guarantee the following tips will help you through the process and may alleviate your fears.
1. Tailor your investment to the ideal tenant.
There are two main types of tenants:
Choose locations and type of properties that appeal to tenants in category #1. These tend to be the more affluent established inner and middle-ring suburbs of our capital cities.
2. Take note of supply and demand.
Aim to buy in suburbs that are dominated by owner-occupiers, as it’s homeowners (not investors) These people become emotionally and attached to homes – and that plays a bigger role in driving prices up.
Also, avoid locations where there are many new apartment complexes going up. They’re often largely owned by investors, which means they flood the market with rental stock, which can impact the return on your property.
3. Buy properties with “owner-occupier” appeal.
Buy the type of property that would appeal to owner-occupiers. Investment-grade properties should have all of the amenities and features that an owner-occupier or quality tenant would desire.
4. Get the right support.
Get a proficient, proactive property manager and don’t just get the cheapest.
Also, don’t even consider self-management. The few dollars you save will never make up for the nightmares you’ll experience.
5. Make sure you are “investment ready”
No one should invest in property unless they’re ready to take on the full responsibility of doing so. This means having a cash flow buffer in place for a rainy day. For instance, if there’s an urgent repair that costs $500 to fix, you want to be in a comfortable financial position to be able to accommodate this. If finding $500 in an emergency would put you under financial pressure, then you’re perhaps not ready to become a landlord.
So in summary, think of the bigger picture and what investing in property can achieve for you.
My main advice today is to minimise your risks by sourcing property with a rental guarantee or find a property that satisfies the 5 points above.