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26. Budget equity.

Allow a 5% equity margin for unexpected expenses. Accurately calculate how much it will cost to enter the market, just as accurately as you calculate how much it will cost to stay in it. If you’ve calculated it will cost you $100,000 in deposit, stamp duty, legal fees, etc to buy an investment property, then you need $105,000 in equity or savings to cover things like a hot water system going bung or a tenant taking off in the middle of the night.

25. Budget cash flow

Make sure you have a realistic budget in place for your lifestyle and stick to it.

Get good with forecasting the balance between income and expenses. Your budget helps you save for a deposit; it highlights how to tight cash-flow might get it; it forces you to think forward; and to consider everything. Don’t set a budget that is too tight to enjoy your life. Remember, property is a long-term investment. If a bank rejects your attempts for finance, heed its warning, and get busy reducing debt or improving cash flow; don’t find sneakly workarounds as these may land you in cash flow trouble.

24. Knowledge is power: Invest in your education

Don’t be frightened to spend on your education. Start off reading a book or magazine each month on a variety of topics about property investment. They are cheaper than seminars. Keep building your library until you start seeing the same things being repeated and a particular strategy resonates with you. Then carefully pick out reputable educators and attend a few seminars. Focus on education and make sure you get your questions answered at seminars.

23. How to find joint venture partners

Co-investing requires a high level of trust to succeed. For that reason it helps if the members of your property collective are friends and/or family members. If you’re not in the position of having friends or family members who share your goals, consider looking for potential partners by:

• Asking your inner circle to recommend your idea to their friends or family members. Odds are that the person you are looking for is only one or two degrees away.
• Posting your idea on a property investment discussion forum and see who responds. You never know what response you could get if you put your idea out there.
• Posting your idea to LinkedIn groups. There are now many LinkedIn groups that have formed around property investing and property development.

Co-investing can allow you toget into the market many years earlier than you could by yourself, meaning you get quicker access to capital growth

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How to strengthen your financial position and find the best property

Jeremy Sheppard reveals his time-tested finance and research strategies to boost your profit and reduce your risks

22. Consider investing with others

The power of compounding interest, and the time value of money, dictate that controlling as many appreciating assets as you can for as long as possible is the key to successful investing.

Australian home ownership rates are around 70% and according to ATO data 8% of Australians own at least one investment property. However, only around 2% of people own two or more investment properties. Clearly building up a quality portfolio of investment properties is not easy to do by yourself.

So instead of waiting for years to accumulate enough resources to take action and make your investments, co-owning property with others is an alternative that can make a lot of sense. It means sharing a smaller percentage of the rewards but co-ownership:

• Can make you money – it can allow you to get into the market many years earlier than you could by yourself, meaning you get quicker access to capital growth and potentially allowing you to build a bigger property portfolio than you could by yourself.
• Can save you money, as it reduces the amount of money you need to cover purchase and holding costs. Saves you time – as you can share the workload of investing and managing your property with the others.
• Can help manage your risk – as you can build a more diversified property porfolio than you could on your own. While investing with others can reduce the effects of your own personal investment biases and can allow you to leverage other’s skills and knowledge to your advantage.

21. If you can’t get a return of $3 for every $1 you spend, don’t renovate

Renovation can almost be considered an Australian pastime! As much fun as it might be to renovate, as property investors we’ve got to keep our heads straight when calculating the profitability of such a venture.

Spend your renovation dollars where they’ll have the most impact, but don’t spend all of your cash on a single upgrade – such as a new kitchen – when the bath is in need of some help!

Determine the cost of your renovations and if you don’t get back at least $3 for every $1 you spend, either don’t renovate or change your renovation plans.

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How to break into the property market even when you’re short on cash

When you’re struggling to save up for a deposit to buy on your own,you may want to explore buying with others. Tim Riley explains

20. Look for properties that are not on the market

This strategy works best when the market is at the bottom – before word has gotten out that it’s starting to move!

Observe the neighbourhood you’re interested in, paying close attention to the condition of the properties.

For example, if you’re looking at one deal, look around the area at the other homes. Take note of who lives nearby and the condition of
their home.

If the property looks like it needs just a bit of care, but is otherwise in good shape, the owner may be more willing to negotiate than someone who already has their home up for sale.

19. Keep a good reference file on your investment property contacts

As property investors we rely on expert advice and opinions from many professionals: agents, valuers,property managers, mortgage brokers – just to start the list!

It’s important to maintain a warm rapport with these individuals – if for no other reason than to simply touch base with them from time to time.

To keep in touch, use a good system of customer relationship management (CRM) rather than just your phone’s contact list. You can even create spreadsheets with their personal information. In addition to the typical contact information – phone number, email, postal address – enter additional information such as their families, or birthdays.

Don’t ever forget that the professionals you count on to put together a great investment property portfolio are people with their own dreams and desires, too.

If you work at creating a good connection, you may receive notice of deals before they hit the market and be warned of any potential issues as well. Thoughtfulness goes a long way to creating a great working relationship.

18. Plan for $3,000 worth of repairs when purchasing an existing property

Include repair costs of at least $3,000 when calculating the profit potential of an investment property.

If the obvious repairs exceed this amount, it may be worth reconsidering the deal.

17. Stick to investment properties within the $300,000–500,000 price range

The majority of individuals buying properties are owner-occupiers, and a very large share of them will be looking for properties just like yours – affordable and within their price range.

By purchasing properties in the “meat and potatoes” price range, you are ensuring a better resale value should you decide to unload the property. I recommend buying a property around the $380,000 price.