You don’t have to look hard in order to uncover information suggesting there’s a magic bullet for investing.
‘Buy cash flow positive’ or ‘Seek small development projects’ might be a mantra for some, but these words usually come from a vested interest, especially ones where the author is trying to earn a commission in the process.
But just as you’d never dream of walking into a shoe store and telling the clerk, “Just bag up whatever the last bloke bought,” selecting the right investment for you and your strategy takes some effort.
Let’s look at how this is best achieved.
Start from the end
Any advisor who tries to line you up with a particular property during your first meeting should cause you a great deal of nervousness.
No advisor worth their salt can take the ‘Have I got a deal for you!’ approach on day one.
Any property selection needs to begin with assessing your individual needs, wants and resources… and this practice must never be shortcutted.
To illustrate, our advisor network has a 14-step process in place between your first meeting with an advisor and the eventual acquisition of an investment.
And steps one to ten have nothing to do with property selection and everything to do with profiling your requirements.
So before you choose the property, set out clearly what you hope to achieve in the long run from investing. Quantify what you want your retirement income to look like and define the resources you have at your disposal.
Layout the journey
Next up, devote some time to estimating what your path from investment to retirement looks like. I realise life is full of unknowns, but do the best you can with the knowledge you have.
Don’t forget to include important lifecycle events too. Time off for the arrival of kids, their future care and education costs, your career growth prospects etc. Add what you can to the plan.
Now, think about what kind of portfolio will fit this life map.
This is really the key to matching the property to investor.
For example, if you’re a young buyer on a modest income at the start of your journey, then you might need to seek a bit more cash flow from your holdings to help service the loan and pay for maintenance and repairs.
On the other hand, a more mature investor who’s earning a bit more and has good home equity might be able to purchase in a high-growth location with slightly lower yield as they seek to build up their net wealth.
Excellent advisors armed with your personal information will be able to step through the acquisition process of your strategy laying out what will likely suit you and your family over the course of your investment plan.
Expert due diligence
Once you’ve identified the investment type that’s the best fit for you, the real detective work starts.
The best possible property needs to be sourced for your circumstances. Again, well connected advisors will be able to help. In addition to unearthing locations with the correct fundamental demographics and metrics to minimise risk and maximise \ upsides, they will have the skills to quickly assess individual opportunities.
Doing adequate due diligence takes a bit of experience. It needs to be efficient, scrupulous and decisive so excellent opportunities do not get snapped up by someone else.
Drawing on desktop tools along with on-the-ground knowledge and a network of contractors, developers, agents and other professionals, an advisor can sift through the pool of possibilities to select the right property for your needs.
Hot tip: stay the path
As you can see, selecting the correct investment for your particular circumstances is essential, but I want to leave you with one important piece of advice.
During your investment life, you’ll undoubtedly come across some seemingly irresistible options. While I applaud the ability for investors to seize unexpected opportunities, try to avoid veering too far off you long-term plan.
Perhaps a handy renovation project turns up in your street, or a workmate puts an ‘easy’ splitter block project in front of you.
Just because the numbers work doesn’t mean the investment is right for you. Taking on a deal that’s outside your needs and abilities is a sure path to losses.
Instead, lean on the advice of your independent qualified (QPIA®) property advisor and ensure you acquired the right assets to successfully reach your journey’s end.