Earning an income alone is never going to give you the kind of financial freedom you need to live the life you deserve. Be it before or after “retirement.”
We’re not talking about private jets, French villas and Louis Vuitton luggage (although that’s entirely possible), but what we are talking about is the possibility to earn an income, above and beyond your standard work earnings, that requires very little additional time – and done correctly, can be life-changing!
Let’s say you earn a $100,000 net income after tax. Let’s also say you are an extra-ordinary saver and you manage to put away 30% of that each and every week for the next 20 years. After paying rent/mortgage, bills, food, fun and life. Giving you a grand total in savings of $600,000.
Sounds like a lot of money…. and it is. However…
It’s not going to give you anywhere near enough money to retire on and enjoy the most of life.
For instance, if you keep it in the bank, $600,000 will earn you an annual passive income of approximately $9,000 per year. Yep, that’s right… $9,000 per year. And that’s being generous with an interest rate of 3% per annum (for most banks it’s currently around 2.5-2.7%).
That’s nowhere near the amount you will need to fund your retirement! Even if you double or triple the amount in interest you receive, it is still not going to deliver any substantial increase in income to change your wealth drastically.
Another solution many people consider is merely paying down their mortgage as soon as they can. Which is great! But then what?
Sure, you’ll be sitting in a house that you own, but it isn’t earning you anything at all. Ever heard the saying “You can’t eat a house…?”
You’ll end up with a home you own, a lot fewer savings and an abundance of lazy money all tied up in your home.
Doesn’t sound a like a plausible strategy so far!
Investing your money over time, using proven strategies (such as property investment) designed to achieve your unique financial goals have been proven time and time again.
But they can also backfire when the wrong asset is purchased at the wrong time using the wrong strategy.
Because of that, and if you are considering property as an investment, here are our 8-Steps to successful property investment.
STEP 1: Determine Your Current Financial Situation
To achieve property investment success, you must first understand your exact financial position. You can’t get from point A to point B without knowing what point A honestly looks like.
It shouldn’t be an estimate or based on assumption, we’re talking about your financial position EXACTLY as it stands today.
Make a start by tracking your weekly income and expenses and asking yourself the following questions:
- Where can you reduce your spendings and convert it to savings?
- Do you have any personal debt that you need to pay down? If so, do it!
- How much do you currently have in savings?
- In your current position, and after savings, how much do you have left over to invest?
Property investment experts know that there is no “ideal” time to buy; instead, investors should make sure it is the best time for them personally, regardless of external market conditions. From there, research and the right intelligence will attract the right investment.
By knowing that your finances are in order, you will be able to act when the right opportunities present themselves.
STEP 2: Get Clear On What Your Goals Are
So above, we touched on defining Point A. Now it’s time to consider Point B – what do your financial goals look like? How does being financially free look to you? And, how much will you need on a weekly, monthly or yearly basis to fund your desired lifestyle in the future?
Take some time to consider how much passive income you will need to generate each year to fund this lifestyle, from this you can determine what amount of net assets you will need to own (above your own home) and what strategies are available to you for this to be achieved.
STEP 3: Create a Strategic Plan
Getting rich is a system. Financial success has nothing to do with luck or chance – It’s a deliberate result of strategies applied over time.
The next step towards property investment success is developing a strategic “step-by-step” plan outlining what you want to achieve as an investor. Your plan must break down your big goal into smaller bite-size chunks that you can complete in a simple, undaunting manner.
You can also consult a professional to help you. They will know what’s realistic from an outcome perspective, what steps you need to follow and can also hold you accountable throughout the process.
At Infinite Wealth, we develop Strategic Wealth Plans for our clients to aid them on their journey to achieving their financial goals. Click here to read more about how a Strategic Wealth Plan could help you to achieve economic freedom by retirement.
In reality, most investors never get beyond their first investment property because they haven’t addressed to a strategic plan. Make sure that’s not you.
STEP 4 – Think Long-Term
Invest for the long-term. Try not to let short-term crises impact your investment decisions.
Temporary market fluctuations should have minimal impact on the long-term growth of your portfolio (even if they do result in a reduction in the value of your investment in the short term).
Be patient in building your wealth and avoid cutting unnecessary corners. Remember, investing for your future wealth is a marathon, not a 100-meter sprint.
Proper planning and hard work lead to prosperity. Hasty shortcuts lead to poverty.
Investing with a long-term view is one of the seven steps to promoting property investment success.
STEP 5: Do Your Homework
- Develop your industry and market knowledge
- Understand the costs associated with investing
- Know your financial limits
To achieve property investment success, you must develop your understanding of the market and be realistic about the costs involved.
Read property-related articles, search the internet and talk to people who have already achieved some level of success in this area. Ensure that you know as much as possible about the market and your options when it comes to investing.
It’s also important to calculate the up-front costs of purchasing an investment property as well as other ongoing expenses. These could include stamp duty, loan fees, legal costs, pest inspections, repairs, rates, insurances.
With the right knowledge and education, property investing is not as difficult as you might think. But, taking shortcuts and not doing the proper research could cost you in the long term.
If you don’t have time to do these things yourself, pay that little bit extra and hire a professional (such as an accountant or property expert) to do it for you.
STEP 6: Base Decisions on Data NOT People
You’ve got your finances in order, you’ve created a plan to guide you forward, and you’ve done your homework. Now it’s time to find a property you want to invest in.
But where to start?
With most properties, we know that 80% of their success comes down to their location.
This is why it’s so important to look for suburbs with strong economic and population growth and infrastructure/construction activity which is likely to result in an increased demand for jobs and housing.
You also want to find a property that will suit a wide range of tenants. You’re not buying for yourself, you’re buying for your tenants. So, consider their needs along with your other research before you purchase.
And, the biggest tip – don’t follow the crowd.
Market sentiment and speculation regarding property prices cause people to buy and sell at the wrong times – selling when the market is down and buying near the peak of the cycle. If you want to achieve property investment success, avoid following trends.
STEP 7: Surround Yourself With a Great Team
Another critical step to achieving property investment success – Surround yourself with a great team.
Treat your investment decisions as a business.
Surround yourself with the best possible team and make decisions based on fact, not emotions.
While you may think that hiring a property manager or an accountant will be more expensive, it’s far better to invest in these people compared to attempting to do everything yourself.
These professionals are experts and can get the job done with less time, effort and cost than you would.
Sure, you mightn’t save the money that you’d hoped to, but if it means buying you time for other things and getting the best value out of your property, then it’s definitely an excellent option to consider.
STEP 8: Protect Yourself
Property investment is often labelled as a risky strategy by those outside of the industry. But with the right planning, insurances, financial firewalls and buffers in place, it doesn’t have to be.
You can also minimise your risk by buying the right property at the right time based on thorough research and careful planning.
Another helpful tip is to be conservative with your numbers – always underestimate your income and overestimate your expenses. This will help to ensure that you’re not stretched financially; protecting you, your family and your investments at all stages of the economic cycle.
This is all catered for within our Strategic Wealth Plans.
Where To From Here…
According to the Australian Taxation Office (ATO), 72.8% of property investors only ever own one property, around 18.9% own two, and only 0.9% of individuals own six or more properties!
Now that’s concerning…
A key reason that many investors get stuck and can only afford to hold one property is that they get the process wrong.
They don’t have a strategic plan, they don’t research the market or surround themselves with a team of experts, they don’t buy the right properties, and they don’t protect themselves adequately with insurance to protect them during times of accident, injury or death. Therefore, they can’t afford to hold any more than one property.
If you want to be a successful property investor, but don’t feel you have the time or confidence to execute these steps all on your own, our team at Infinite Wealth can help you.
Learn more about our breakthrough strategies that can create a profound change in your wealth & finances, enabling you to achieve your financial goals and live the life you truly deserve.
Come in for a FREE Planning & Strategy Session, and we will explore your current situation including how you’re tracking and what’s possible for your future, using only what you currently have available to you right now.
A Planning & Strategy Session is typically valued at $295, but for registering now, we will offer it to you for FREE. Click here to register for your FREE Planning & Strategy Session.