Congratulations! You’ve decided to add another property to your portfolio. This is a fantastic move and your future self will thank you.
We’ve put together a handy primer of the 7 questions you should ask at each step of the way.
1. What do I need from this property?
Whether you’re buying another investment to boost your passive income or you’re looking for somewhere the kids can move into while they’re studying, you need to have a clear goal. Purchase without strategic objectives in place and you may regret your decision.
2. Does my partner agree with this decision?
There’s nothing more sure to come between your relationship than making major financial decisions on your own. I always ask that both parties are present at a Discovery Session which you can find out more about here. Although couples often think they are on the same page, when it comes to the crunch there can be stress about moving forward. That’s why I have a Discovery Session prior to uncover those fears and answer those burning questions.
3. Do I know how much I can borrow?
Finding out your borrowing power isn’t just a simple matter of a quick phone call to the bank. If you already own property, you’ll need to get valuations done. This applies equally to any owner-occupied property as it does to your current rentals. Equity in any of these assets could help fund the deposit on your next investment.
4. Am I buying in another area from my existing investment?
Diversification is the name of the game. Nowhere is the saying ‘don’t put all your eggs in one basket’ more likely to apply than with property. Look outside your current investment zone for your next piece of real estate.
5. Have I done the research?
You really need to know your stuff before you buy an investment property. I suggest that anyone building a portfolio has to be strategic with their decisions. Some people want to increase their investments, but just don’t have the time – this is when it’s a must to call in the professionals and engage a portfolio specialist such as myself.
6. Are my insurances up-to-date?
A major risk mitigation tool for investors is to ensure their insurances are up-to-date. Don’t move forward with any investment decisions until you’re properly covered. I suggest my clients have income protection, building and landlord insurance, at a minimum.
7. What sort of cash buffer will I need?
Once you’ve worked out how much you can borrow, it’s essential to add in a cash buffer. This is the secret to my success. Calculate up to 3, 6, 9 or 12 months’ worth of expenses for your rental property and put that sum in a rainy day account.
Have you added another property to your portfolio? I’d love to hear about your experiences.
As always, if you have a question, leave your comment below.
Until next time,
From the desk of Christine.