If you were to ask 100 successful real estate investors ‘How do you use real estate to make money?’ – you would most likely get 100 different answers, and in fact each of them would be correct. But the one thing that they would say in common is this – ‘You make your money when you buy the property, not when you sell it.’
And today I wanted to share with you, what I believe you need to know about buying a solid investment property.
Here are 3 fundamentals to successful real estate investing that I live by:
- Buy in the right ‘Micro-Market’
Property values don’t always go up, but there is always an area where property prices are growing at any point in time.
And yes, this includes during the recession periods.
You see the Australian property market is not just one market, it’s not even a handful of markets around the capital cities…
In reality, Australia has over 1500 suburbs comprising of hundreds of smaller ‘micro-markets’. And at any one time, there may only be a fraction of these suburbs performing well.
Each of the markets have their own unique characteristics and growth cycles.
To be successful, you need to seek out the micro-markets that:
- Have a steady rental demand. These will attract the quality tenant. This means that you will not be caught out with long term vacancy between tenants or experience significant property damage.
- Is due to experience significant short-term growth so that you can get a quicker return on your investment.
- Will continue to trend upwards in value over the next 2-3 decades so you can build real wealth over the long term.
But buying in the right area just isn’t enough.
You also need to …
- Buy at the right time on the Property Growth Cycle.
As we mentioned, each micro-property market has its unique growth characteristics.
Successful real estate investors understand the property cycle and the impacts of timing on the market. We represent this cycle in the form of a clock.
The Property Cycle
The property cycle moves from a Slow Down to Slump phase from midday through to 6 o’clock and then to the Recovery and Boom phase of the cycle falls between 6 o’clock and 12 o’clock. Then again, the values of property will plateau and sometimes they may even fall slightly, as they move into the next Slow Down phase.
And the cycle continues on and passes through the phases again and again. In general terms this cycle will take between 7 to 10 yrs.
So timing the purchase within the growth cycle of the suburb is the trick to making money with real estate. This means identifying suburbs in the beginning of the growth cycle (somewhere between 6 and 10 o’clock), where you can ride the wave of growth. (…and best to do this before the other investors catch on to what the market is doing. Hint Hint!)
Doing this will give you the best capital growth early in your ownership of the property, so that it can be leveraged for further investments. This means you will be able to grow your portfolio fast!
And would you like to know the best part of timing in the market?
It is entirely predictable.
You can identify the small growth pockets with accuracy – and time the purchase to perfection – so that you can get in early and experience the growth cycle almost immediately. Nice!
And now the final step.
- Use the created equity to turn your one property into 2, or 3 or more!
When you have chosen in the right area, perfected the timing and structured your property purchase like a pro – you should see significant growth in your equity position very early in your investing game.
You can use this equity to secure finance for your next property purchase. This way, you can build your property portfolio fast, without having to wait the tradition years for ‘time in the market’ – or while you save for another deposit.
Then we go through the selection process again and repeat the process with the next purchase until you have built up your portfolio to fulfil your personal needs (think replace your income so that you can quit your job… or maybe so that you retire sooner and live a comfortable lifestyle)
When you do this right, there is actually very little risk to you as an investor.
So now we know we need to:
- Buy in the right area
- Buy at the right time
- Use the created equity to grow your portfolio
But you’re probably wanting some more specific details?
Well here’s the great news…
Now you can learn the exact system we (my husband and I) used to create a self-funded retirement, using residential real estate – in only 3 years.
Announcing our free training – ‘How to Build Your Property Portfolio in the Next 3 to 5 Years’ … so that you can fast track your retirement and live a comfortable lifestyle.
Together with Tabitha and I, you’ll discover:
- The exact 3 Step Formula To Build A Property Portfolio used by professional investors to ensure the retirement goal fits your personal situation, and why following this process is practically guaranteed in generating you a ‘more than comfortable’ retirement.
- How to create your own mini property boom in the next 12 months regardless of the economic climate.
- Why following the award winning ‘Pathway to Wealth” strategy can achieve your financial goals much quicker.
- The exact 6 Steps to a $1.5m early retirement strategy, featuring a residential investment property as one ingredient.
- 10 specific strategies to manufacture growth using residential real estate. There is bound to be at least one strategy amongst them that suits you and your personal situation. Watch your future retirement transform before your eyes when you apply just one technique in 2017.
- When to search for growth property for capital gain versus income property for cashflow (get this wrong, and you could back yourself into a corner)
Plus much, much more…
Article by Janene O’Connor
Janene has 13 years’ experience in the Banking and Finance industry and has been investing in real estate since she was 23yo. She went full time into residential real estate in 2000 – initially as a sales person and then became the business owner of 3 successful real estate offices on the Central Coast.
She lived the single parent life after having been widowed in 2005. After 8 years, she re-married and then built up their property portfolio (in only 3 years), for her and her husband to retire on.
While living off the income from her portfolio, Janene now devotes her spare time to helping others to achieve financial freedom though the use of residential real estate investing.