How to Start Investing in Real Estate in 2023?

How to Start Investing in Real Estate in 2023?
5 min read
15 February 2023

First things first - real estate investing is all about taking an individualistic approach. There is no one-size-fits-all property investment strategy that works for all amateur or seasoned investors.

And if you’re wondering whether 2023 is a good time to invest in a property, the short answer is yes! Why? Because there is no right or wrong time to buy property - it is not a one-time event, but a process.

Finally, if you’re simply holding back because you don’t know where to start, keep reading as this guide will offer sound property investment advice for beginners to grow their portfolio whilst minimising risks.

1.    Develop a Plan and Stick with It

There are different kinds of real estate investment strategies, including house hacking, BRRRR deals, syndications, etc.

Understand the ins and outs of each strategy, ensure it aligns well with your risk profile, time frame, and investment objectives, and stick through with the plan. The plan should consider the following -

  • Decide how long you wish to own the property.
  • Assess your current financial position.
  • Understand the area you wish to invest in to know properties with high tenant appeal.
  • Similarly, understand the rental market.
  • Calculate your potential returns before proceeding.

2.    Secure the ‘Deposit’

Another important move of real estate investing for beginners is to secure the deposit needed to invest. Typically, a deposit of at least 20% is needed.

In case it’s been years since you purchased your home, you may have sufficient equity to use in place of a cash deposit. However, if that is not the case and you still wish to start real estate investing, opt for a guarantor loan.

Then, you need to select the suitable interest rate (fixed or variable) and the loan type.

3.    Calculate Ongoing and One-Time Costs

When it comes to purchasing an investment property, there are certain ongoing and upfront costs involved, which need to be considered. For instance - there are fixed costs like application fees, stamp duty charges, etc.

Other costs may depend upon the type of property. Suppose you decide to invest in a property unit like a townhouse or apartment, a strata search cost is levied. It is charged for the strata report, which shows how safe the property is. This includes outstanding repair bills to existing in-building disputes.

Even pest report charges may be levied to ensure there are no pest-related issues around the property. Then there are ongoing costs like land tax, accountant fees, body corporate fees, lease expenses, etc.

4.    Understand the Purchasing and Negotiation Process

Many amateur investors do not understand that negotiation is a part of the purchase process. There are still others who negotiate but only the final price.

Another important property investment strategy is to realise that everything in the process is negotiable, not the purchase price alone. This includes the settlement terms, deposit, etc. While you can negotiate in every stage, ensure there is a balance.

If you push it too much, the deal may come across as unattractive to the buyer.

5.    Leverage ‘Tax Perks’ on Property Investing

It is important to invest for capital growth but a well-rounded portfolio also considers cash flow. Without a safe bottom line, your entire asset base is put at risk.

Does this automatically mean you must invest solely in properties that are cash flow-positive? No! Instead, capitalise on the different tax incentives available for residential property investors. Get together with your accountant and determine whether you’re utilising depreciation allowances and tax deductions.

6.    Remove Your Heart from the Equation

As harsh as this might sound, it is sound property investment advice. In most cases, new investors look at their property from a place of emotions (because home is naturally synonymous with loving memories).

However, it is important to realise that real estate investing is a strategic approach based purely on a financial perspective. Start looking at the property as a commodity, just like you would any other product.

Think of generating the desired revenue or profits and you’ve begun understanding the numbers game.

Quick Tips for Smart Real Estate Investing

Let’s look at some quick, tried-and-true tips for real estate investing for beginners -

  • Invest only after researching the market thoroughly.
  • Have a concrete plan, and let it make room for a renovation timeline.
  • Budget, budget, and budget - for raw materials, real estate agent fees, loan interest, etc.
  • Purchase property in an area where demand is expected to rise soon.
  • Get renovations done with the target market in mind, not your personal preferences.
  • Get in touch with an experienced real estate agent to sell the property as fast as possible.

The Bottom Line

Starting with real estate investing can be daunting and overwhelming. Too much is at stake, and making decisions solely based on sound analytical metrics and research can be challenging.

While you follow the property investment advice this guide offers, seek help from top-notch property investment professionals with deep knowledge and experience in the field. They will help you every step of the way - from devising your ideal property investment strategy to coaching you on building the right portfolio.

Start your real estate investment journey the right way!

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