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Investment property can be a great way to grow your financial success, and even secure
financial freedom for yourself where you don't have to work for money and you effectively
get enough passive income that you can live off. But how can you get into investment property
and how can you get started?
Hi, I'm Ryan McLean and I'm from PositiveCashFlowAustralia.com.au, where we teach people like yourself how to
find and invest in positive cash flow properties all over Australia. And so today we're talking
about some tips and things that you can do if you want to get into investment property.
Tip number one is to set financial goals, and I always come back to this in every single
video that I do or podcast that I do. A lot of people - so many people - go out and they
look at property and they purchase property without setting financial goals first. They
don't know what they want to achieve financially. They don't know what properties are going
to help them achieve their financial goals, because they don't have any. By setting financial
goals and understanding exactly what you want to achieve, then you're going to be in a better
position to then go out and to achieve financial success and to purchase properties that line
up with your goals. You can check out one of my videos on how to set financial goals
and more information on assets and liabilities and things like that.
Tip number two is to calculate your borrowing capacity. This is really simple to do. All
you need to do is go into Google and simply type in, "What is my borrowing capacity?"
or "How much can I borrow?" And what will come up is a bunch of links that are loan
calculators. These are calculators that the banks have created for online use, where you
can punch in your details - how you much you earn, what your rent is, all these sorts of
things - and it will estimate what your borrowing capacity is. That's the most simple way to
do it. If you want to get a more accurate statement, then I do suggest going to a mortgage
broker, which is a free service, and they will help you assess how much you can borrow,
because from lender number one, you might be able to borrow maybe $300,000, but then
lender number two might be willing to lend you $500,000. There can be a great variation
in what each lender is willing to lend to you. So by speaking to a mortgage broker,
you're getting access to a large resource of lenders, and they will be able to tell
you which one is best suited to you. Mortgage brokers make a commission when you sign up
for a loan, so generally it is a free service that they offer to you, and when you go and
you get your loan in the end, if you go through them then they're going to get a commission
for their work. So keep that in mind. They are commission-based, so don't just use and
abuse them because it's free. They need to be paid for their services eventually, so
if you do go, maybe consider going through them.
Number three is to then go ahead and save your deposit. It's very hard these days to
buy an investment property and to get into investment property if you don't have a deposit
saved and you don't have proven savings. Unless you're getting a gift of the 20% deposit from
a family member or a friend, or if someone's willing to go guarantor for you on your loan,
then you're going to need to save some of your deposit. Banks are looking for generally
a minimum of 3-5% of proven savings, and what this means is you can prove that you've actually
saved this over time, that it's not just some lump sum that you got from someone else. The
banks want to see that you have the ability to save money and therefore the ability to
pay your loan. If you start saving your deposit, you could use the first home buyer accounts.
I don't know if they're still active. Or you could just save it in your own account. Keep
a separate account, add to it on a regular basis, and you can then use that to show the
banks that you've saved your deposit. And, obviously, by saving a deposit you are then
putting yourself in a position to be able to purchase a property, because if you don't
have a deposit, it's going to be very hard to buy a property. But if you are interested
in buying a property with no money down, then check out this video: How to buy a property
with no money or little money. And you can see if some of those suit you.
Tip number four is to then go ahead and learn about property investing. It's going to take
you some time to save your deposit. You may as well start learning about investing in
property while you're saving your deposit. It's not a great idea to have fully saved
your deposit, decide it's time to invest, and not know anything about investing. There
are so many steps that you need to take and so many things that you need to consider if
you want to go ahead and invest in property, so it pays to start learning before you need
to know it. You need to know about financing. You need to know about researching the areas.
You need to know about building and pest inspections, getting solicitors or conveyancers. There
are so many different things that you need to know about that it pays to start learning.
So I do suggest the book, "From 0 to 130 Properties in 3.5. Years" by Steve McKnight as a starting
point, and that will give you a good overview of how he purchased so many properties, and
he also goes into all the details of the cash flow and things like that. It really gives
you a good overview, and you can read things like "Australian Property Investor" magazine
or "Your Property Investment" magazine, or you can just go through Positive Cash Flow
Australia. Watch more videos, listen to more podcasts, or read some more articles. But
start building up your experience, start building up your knowledge before it comes time to
invest.
Tip number five is to then go ahead and get pre-approval. So you've saved your deposit,
you've set your financial goals, you've learned about property investing. Before you go out
and start looking and making offers on property, it's a good idea to get loan pre-approval.
You can do this through your mortgage broker or you can do it through your lender of choice.
And basically what this means is that you are pre-approved for a loan based on a clause
of the valuation of the property. So you're pre-approved, but they will need to value
the property before they give you the money. And what this means is that you can move so
much faster when it comes to making an offer and buying a property. Because you're pre-approved,
you just need to get that valuation done, and then a few other things, and your loan
is then given to you. But if you don't have pre-approval, then you have to go through
the pre-approval process, which takes time, and that could hold you up from purchasing
a property. So getting pre-approval ahead of time is a great idea if you're trying to
get into investment property.
Tip number six is then to start researching. We want to research properties and we want
to research the area. A lot of people will go out and, let's say they just want to buy
in their local area, they will go and look at two or maybe three properties and then
make an offer on one and purchase it. But they haven't done their research and they
don't know whether they're buying a property that's overpriced or whether it's a great
deal. And they don't understand whether or not their area is going to grow or what’s
going to happen there. So if you want more information on doing research of the area,
I've gone into great deal on this in the Positive Cash Flow Academy, so you can check out PositiveCashFlowAcademy.com
if you want to learn more about researching the area. But I do recommend that you follow
the 100/10/3/1 Rule, which is used by many successful property investors, and that is:
you look at one hundred properties, and you might make offers on ten properties. Of those
ten offers that you make, maybe only three will be accepted, and of those three that
are accepted, you'll go ahead and purchase one property. So rather than just going out
and looking at a couple and buying one straight away, you want to do your research, you want
to buy the right property that's going to grow and deliver the financial rewards that
you seek.
Tip number seven is to calculate all of your expenses. Don't just assume that because your
mortgage is $400 per week and the property rents for $450 per week that your property
is going to be positively cash flowed, because it's probably not. There are a lot of expenses
associated with investment property that you need to consider before you go ahead and invest.
There's a huge list of things, from council rates to property management fees to insurances
and many others things. If you want more details about that, then you can check out my blog
post on the twenty different things that you can claim against your tax, because that will
give you an idea of the expenses that you're going to have to pay. Or you can check out
the Advanced Property Calculator, which is over at PositiveCashFlowTools.com, and that
will then allow you to punch in all the numbers of all your expenses, and then it will pop
out the cash flow that the property is likely to generate. So make sure you go through and
you do the financial analysis on the property. Make sure you understand all the expenses
before you go ahead and invest, because I would hate for you to go and buy a property
only to discover that you really can't afford it.
And tip number eight is to then take the leap and go ahead and make some offers. Go ahead
and invest in a property and get started. Robert Kiyosaki, who is the author of "Rich
Dad, Poor Dad", which is probably the number one bestselling finance book of all time,
he suggests that you go ahead and you start by investing in smaller deals first, before
you bet the house, before you bet everything that you have on one massive deal. He says
to start with smaller deals, to grow your experience, to maybe lose money on those smaller
deals or maybe make a little bit of money. As your experience grows then as an investor,
your chances of making more money on each and every deal goes up.
So there you have some ideas on how to get into property investment. If you want more videos, articles or podcasts just like
this one, then head over to PositiveCashFlowAustralia.com.au, or you can use the short link, which is pca.im,
which should redirect you straight to the website. Until tomorrow, which is when the
next episode is coming out, stay positive. And if you've hung around this long, then
that means that you are a great supporter and thank you very much. If you are on YouTube
or watching the video, then I do suggest you check out this post, right here. You can just
click that link and that will take you directly to the video and you can keep viewing and
keep learning with me, and keep growing.