Getting involved in real estate investment requires planning for success. In this article we have a look at what is involved in that.
A real estate investment plan
As you begin, it’s good to map out a real estate investment plan. Your plan might be extremely detailed, or more general, but it ought to be something that has been checked out to some degree for feasibility, and it should be written down. Over time it can change and be adjusted, but it is something that should guide you as you make decisions along the way. You may want to seek help from a financial advisor or someone experienced as a property investor. However, we would give you a very big caution. If the one you are dealing with simply wants to invest in their projects, find someone else to guide you.
So what does a real estate investment plan look like? It can be done in a lot of ways, but from the perspective of a financial advisor, it would simply be a component of a comprehensive wealth creation plan. It should indicate the level of exposure you want to have and even that can be expressed in different ways. One way would be to say that you will target a certain percentage of your net investment assets to be in real estate. You may set out whether you want to focus on residential or commercial property. It should include in general terms the strategy of buying and selling. For example, the plan may be not to sell any property until you are well into retirement, and that the properties will be sold as necessary to maintain cash flow for the planned income stream. It should address your risk management provisions.
You can target owning a certain number of properties, but that may not be all that helpful. We have worked with people who have had the objective of purchasing one investment property for each of their children. That’s fine if one’s own retirement funding is a non-issue. However, most children would prefer for their parents to be self-sustaining than to have mum and dad have to move into a granny flat in the back garden of a home that was given to them! Generally the focus needs to be to first provide for one’s own future, then to generate a surplus that can be used to benefit others.
It’s possible to use a spreadsheet or a financial planning tool to generate a detailed real estate investment plan with specific numbers going all the way through retirement. Such things are helpful to a degree; however they cannot be depended upon. Too many things change in financial and property markets going forward to make their long term projections accurate. However, if they use historically conservative figures, then they can be a benchmark for you to compare your progress with. If your net investment wealth is well above what the plan shows at a point in time, then you can be reasonably comfortable. However, if you are lagging behind, then it’s time to make some changes.
While your long term plan may be set out in more general terms, the next step of your plan needs to be very detailed. This will include a cash flow analysis of what it is going to cost you before tax and after tax. The eBook will give you detail on this. It would also be helpful to make some growth projections on that property to target a time for your next acquisition. See the section in the eBook on “Mapping property growth.”
The final part of your plan should be a record of progress. Each year you should record your actual assets and liabilities as well as income. They should be broken down in detail. If your plan is also detailed, then you can compare the progress of each investment as compared to the plan.
Keep in mind that when it comes to retirement funding that it isn’t simply a matter of generating a bunch of wealth. There are a lot of tax and government benefit issues that can make a big difference and they are changing all the time. There are also tax and risk management issues that need to be considered in how you own your property. You would be well advised to see a financial advisor at least several times along the way to make sure your plans are in harmony with the best outcome regarding your actual retirement funding. If your advisor is one that you work with every year and also gets involved in each property acquisition decision, that’s even better.
A property investment loan
As you get involved in real estate investments, you will need funding for the purchases. It’s not just the matter a cheap loans with a low interest rates, it’s also having the structure to facilitate the ongoing investment activity. State Custodians Mortgage Company has helped countless people to get started in property investing, and they continue to come back as they add on to their investment property portfolio. So give them a call today on 13 72 62.