All successful real estate investors operate on similar philosophies that help them grow their wealth through a portfolio of properties, and these can provide valuable lessons for first home buyers.
Many investors limit their risk by diversifying investments in different cities and suburbs, and they will hold a variety of property types, such as apartments and detached houses.
When they set out to build their portfolio, the most successful underpin all their decisions with a goal to build their personal wealth, a game plan to achieve that wealth and a time frame by which they want to accomplish it.
Even if you’re looking for a new home to live in, having this mindset can be a strategic and powerful way to view your first property purchase.
All smart investors conduct their own research on various property types and the suburbs they have targeted for investment.
At the same, top investors will always seek advice from professionals, such as a builder, a real estate agent, solicitor and mortgage broker. Armed with their knowledge, they are better able to resist the emotional purchase to avoid one of the most common mistakes and fears – of paying too much.
By doing this homework, investors understand thoroughly how long it is likely to take for the property to produce a return and the kind of capital growth they can expect.
Another way to avoid this risk is to have your budget firmly in place. First home buyers should work with a mortgage broker who can help you assess what you can afford but also put the finance in place in advance of any purchase.
To build long-term wealth creation, investors will then look for insights that signal a suburb is a high-demand area. Solid signposts for these areas include planned government infrastructure projects, gentrification trends and residential spillage from surrounding suburbs.
Even with all this knowledge and confidence, smart investors mitigate their risk.
If a purchase is reliant on an income, then they will take out wage protection insurance. Where a property is to be rented, insurance for potential rental property damage is an essential. As a first home buyer you should consider insurance options that will help you pay your mortgage should you become ill or out of work.
Top Tips:
- Think Long-Term for financial goals in mind
- Use your head, not your heart. Don’t let emotion conquer all
- Know the value of the property to you and don’t pay over the odds
- Research areas that are likely to perform strongly. Don’t follow the pack
- Know your budget, have the finance ready to go
- Ask the experts. They know the value of experience but they do their research, too
- Understanding risk and how to mitigate it
- Don’t set and forget your property purchase. Property portfolios need to be reassessed periodically, just like exposure to financial markets
- Be organized, calculated and mindful and act strategically. It will help you act more confidently.