No plan survives first contact they say and this is definitely true with investing, unknown variables can crop up anywhere anytime and ruin your perfectly calculated strategy. However you shouldnt let this scare you away from being prepared. The best plan is a flexible approach, ready to accommodate disaster or opportunity with a strong safety buffer.
Playing it safe is relatively straightforward, be conservative with your budget especially for your first property, if things go bad you want to still be able to pay your mortgage without fear of foreclosure. For most people it comes down to risk vs reward.
Some of the more risky options could be buying and flipping in short-term high growth areas like mining towns like Port Hedland or the Hawsons Iron Ore Project 60km south west of Broken Hill which currently has pretty good rental yield, low capital growth, a very low vacancy rate but a declining population.
A closer look reveals LendLease is going to spend $40million building a shopping plaza, Carpentaria Exploration made their announcement about Hawsons in mid-December and then there is also the new Silverton Wind Farm project and its $2.2billion worth of investment which is obviously a major cash injection into that area.
It should be said that nothing is set in stone, any one of these companies could encounter trouble and cancel their project leaving you with a worthless property in a dead-end town.
Damon Nagel, managing director of property investment advisory firm Ironfish, recommends that investors who adopt a long-term view and strive to build a balanced portfolio will achieve the most success. He stresses the importance of strategy
From the outset, adopt a clearly defined strategy and aim to build a portfolio that will meet your objectives, he says. Property investment can be broken down into three distinct phases growth, consolidation and income realisation and your objectives will determine the strategy and the types of property in which you choose to invest.
As with any good strategy, the key is research and I like to keep it simple when figuring out my budget for this my favourite resource has always been this Your Mortgage home Loan Repayment Calculator, but the beauty of the internet is that whatever you're going through, someone else has probably done before and with a bit of luck you can learn from their experiences.
Great communities form around investing, trading stories and tips such as the Your Investment Property forum which is great for Australians who want a personal look at investing. As with all things its best to take this information with a grain of salt but learn as much as you can, its free and easy and youll be armed with a much better understanding when you start to consult with professionals.
You should learn about positive vs negative cash-flow, the pros and cons of each and why certain people advocate one or the other, both are very valid approaches depending on your situation.
If youre considering something different like a property syndicate to spread the risk and financial burden forums like the above can be a fantastic place to read about the successes and failures of others.
Tim Riley from the Property Collective wrote, I've been in three property syndicates since 2006 and am involved with two at the moment. Money issues are a constant presence in any business and a syndicate is no difference. In the syndicates I've been involved in, particularly my first one, had their fair share of money stresses. However, in that instance we managed to work through the issues and arrive at a solution that worked. So there are a few ways to enhance your knowledge and learn from the mistakes and successes of others.
It should be said though, learning by doing is the fastest way to become an expert, you'll probably never understand the in's and out's of property investing completely until after you navigate the minefield of your first investment.