Investing in property is a process that takes time, research and understanding of the pros, cons and risks, as well as associated costs of buying, managing and selling.
Treat property investment as a business with a long term strategy. I often say property investing is managing finances with a few properties thrown in!
So before you start you need to get educated and understand the process so you can build a solid foundation and wealth from more than one property over time.
In this blog, we explore how long the process might take so you are well prepared for it. In terms of time, the process can be easily broken into 4 key parts as follows:
- Education, research & planning
- Acquiring the property
- Holding the property
- Divesting the property
We go into them in more detail below and outline the potential timings.
1. Education, research & planning
One of the most important stages of property investing happens before you actually buy the property. It is educating yourself on the process and the risks involved, researching the market, setting up your budget and finance, then putting together a plan on how to execute it.
If you fail to plan, you plan to fail. Being prepared is the key to buying the right property that will suit your circumstances and build your wealth over time.
This first phase might take anywhere between 1-3 months to give yourself sufficient time to prepare before acquiring the property. It usually involves the following:
- Education & Research - why to invest, when to invest and where to invest - consider partnering with a property investment advisor to help you identify suburbs and suitable properties for you.
- Finances - establish your budget and borrowing capacity - potentially work with a mortgage broker and financial advisor to assist you in this process.
- Investment strategy - write down your goals and decide which investment strategy will best work for your individual situation. If you’re not sure which strategy is right for you, a property investment advisor can assist with developing the right strategy that will suit your goals, risk profile and future income requirements.
2. Acquiring the property
Once you’ve done your research on the suburbs and comparable sales extensively and found the right property for you, you need to negotiate to secure the property at a favourable price and terms thereof. This process to purchase an existing property can take about 1-2 months, and it involves dealing with real estate agents, building and pest inspection service providers, and solicitors to help you settle the property. The property might already have a tenant in it, but if this is not the case you have to allow time to also find the right property manager to help you source a tenant and manage the property moving forward.
If you are buying off-the-plan from a developer or buying land to build a brand new property, then the timing of this is all dependent on developers, the DA process and the builders involved.
For example with my clients, if they are building a new investment property, then the process of buying land, negotiating with a builder and the DA process can take anywhere between 4 weeks to 3 months. The build process can take another 8-10 months depending on the builder and the build type, i.e. single or double-storey home.
3. Holding the property
If your strategy is to buy and hold the property for capital growth to set you up for retirement it is recommended to hold your investment property through as many property cycles as possible, with each cycle taking about 7-10 years. This is to ensure you get the full benefit of capital growth over time.
During this phase, you will have to invest time into maintaining the property and its upkeep as required to ensure it is in the right condition for tenants over time to minimise vacancy as much as possible. Having a good property manager and builder on your side means you can rely on the experts to help you in this process and minimise the time you personally have to invest.
When you get to this phase it is all about picking the right time to divest to get the best possible return! Unless you’re in a rush to divest, you obviously don’t want to sell during the downturn or bottom of the market.
The process of preparing your property for sale, finding the right agent, listing the property for sale, finding the buyer and settling the property can take anywhere between 2-3 months.
When time is of the essence
If you are not willing to sacrifice time to do it all yourself, the alternative solution is to partner with a qualified property investment advisor to simplify the process and make it more manageable for you while saving you time, frustration and money. When selecting an advisor it is important to rely on someone qualified and experienced to assist you on the journey.
I have established EKR Property to assist first-time investors and seasoned investors in sourcing, negotiating and securing their next investment property and building a property portfolio to set them up for retirement.
I can also put you in touch with mortgage brokers, solicitors and accountants for further financial and loan advice to help build your team of professionals, saving you time and money, while minimising risk.
The earlier you start your property investment journey and building an asset base safely, the earlier you can create a passive income with property to replace your own income. Reach out to EKR Property anytime at firstname.lastname@example.org to book a free consultation.