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TIP: You know its time to sell when depreciation decreases, maintenance increases, and rents stabilize for two years. —J.T. Purvis, ERA National Realty of Arizona, Prescott, Ariz. Bob Ward’s 11 Commandments for First-Time Investors Australian real estate broker Bob Ward, HUNTERS, the Professionals in Terrigal, New South Wales, helps you get off on the right track, whether you're advising investor clients or becoming a real estate owner in your own right. 1. Rely on the numbers and leave emotions out of the transaction. Since you won't be living at the property, it's not critical you adore the color scheme. Instead focus on purchase price, rental return, and potential gain. 2. Start small; you'll be able to sleep at night that way. Since at first you may be subsidizing your loan repayments from your regular income, a lower loan payment is less painful if rental income doesn't materialize. 3. Treat your investment as long term. Unless you've bought an absolute winner, you won't achieve any really substantial gains short term. 4. Buy within driving distance of home. It's reassuring to be able to see the property regularly, and it will be easier to stay current on market trends. 5. Engage the services of professionals. Find an accountant, an attorney, a lender, and a real estate professional who understand real estate investment. And don't be embarrassed to check their credentials. 6. Obtain advice from your accountant on the best structure for purchasing the property. In some cases, you may be better off purchasing the property in your spouse's name, jointly, or under a newly established legal entity to minimize your tax liabilities. 7. Consider a fixed-interest loan when borrowing. Fixed payments will provide a certainty that will make planning easier. 8. Avoid properties with high-maintenance, special features such as a swimming pool and large garden. Choose properties with mass-market appeal. 9. Don't attempt to squeeze the last drop of rent from your tenants. It makes sense to earn a little less and keep a long-term tenant who will take good care of the property. 10. Don't use your own home as collateral. Save the money for a deposit and treat your investment property as a totally separate entity. 11. Don't stop with one investment property. It gets easier. Adapted from REALTOR® Magazine Online, August 2001. A variation on this article appeared in the Journal of the New South Wales [Australia] Real Estate Institute. Tax-Deferred Savings Vehicles > |