Creating a Financial Plan to Buy a Property
Want to invest in property? Create a financial plan first
Most Australians are pretty good at managing their money. That’s according to ASIC, who found that 8 in 10 Australians keep a budget, and 60% of people aged 35-50 felt confident managing their money.
But the same report found less than half (45%) had a 3-5 year financial plan. Moreover, only about one quarter, 24%, were thinking about their finances in the long-term.
Many people plan to invest in the Perth property market, but up to three-quarters are missing the strategy to make it successful. With a bit of planning and the right advice, you can not only get more for your money but also make smarter property investment moves that pay off long into the future.
Why you need a strategic property investment plan
There are a lot of factors involved in property buying. Your ability to buy property in the future is not based solely on how much the bank will lend you now. Planning a successful property purchase means considering factors like:
- The type of loan
- Property type (house, apartment or new build) and its future potential
- Subdivision options
- Your investment goals
- Property values now and in the future
- Your personal plans and future financial security
- Renovation costs
- Land and Title costs
- Potential rental income down the track
This is true whether you’re buying your first home or building a property portfolio. As professional Perth property buyer’s agents, we help our clients establish strategic purchase plans that look at much more than their borrowing capacity.
So, let’s dive into some ideas to help you create a purchase plan for successful property investments.
Creating a financial plan for investment: Tips from a Perth buyer’s agent
1. Understand your current financial position
- Save as much deposit as you comfortably can (remember to factor in renovations and moving costs)
- Work with a licenced financial planner or mortgage broker to assess your borrowing options
- Decide which loan type suits your lifestyle
To save for a deposit, you need to know how much you can comfortably borrow. That means your first step is a financial health check. You might want to consult a bank or mortgage broker in this step, although there are some things you can do yourself.
For example, eliminating credit card debt (and other personal debts) is a great way to prove you have a handle on your finances. You can also put together a picture of your assets, such as savings accounts and vehicles, to see how your budget balances.
Once you have a clear picture of your position, it’s time to talk to mortgage lenders. You can get pre-approved for mortgages now if you are confident in your broker’s advice, or you can hold off and assess your strategic position with a buyer’s agent. The relationship between lending capacity and loan type can be circular. By that, we mean you can either:
- Choose your loan depending on your borrowing capacity
- Adapt the amount you borrow based on the loan
The second option leaves more room for your strategic goals. As a buyer’s agent, we can help you decide which direction you should take based on your borrowing potential, short and long-term property investment goals and how involved you want to be in managing the property.
2. Set your goals
- Set clear, measurable, attainable goals
- Ask yourself some honest questions about property investment
Property investment is a great aspiration to have – but what is your ultimate goal? For example, are you investing in property to earn rental income? Building a property portfolio? Or are you investing for financial security later in life?
Set these goals early. Then, as you work through the purchase plan, you will stay focused on your property investment “north star”.
Your property investment goals should be clear, measurable and attainable. As professional buyer’s agents, we help clients define their goals long before committing to any property investment decision. We ask these questions:
- What is buying a property going to help you achieve?
- When would you like to achieve it?
- What are some obstacles in your way?
- What are your strengths as a Perth property investor?
The answers help you set your investment strategy in motion and point you towards the perfect property. For example, you might have always assumed you would buy a house in the suburbs, but your goals align better with an inner-city apartment.
Here is where a buyer’s agent becomes invaluable.
3. Map out your investment strategy
- Work with a Perth property buyer’s agent to turn your goals into a strategy
- Consider a range of property investment combinations
- Look for value-add opportunities across the property market
When we present a proposal, it factors in everything we’ve already talked about: your lifestyle, aspirations, financial position, borrowing capacity and more. But where a buyer’s agent adds significant value is in our ability to look forward and across the market.
It’s our job to advise you on points like:
- The best Perth suburbs for property investors
- Short-term and long-term return potential
- Initial outlay and repayment options
- How your loan structure influences returns
Our ultimate aim is to help you reach your goals. That means we will present financial modelling on a range of options, including the suburb and home style you’ve always wanted, plus a few recommendations you might not have considered.
Once we are all aligned on the strategy, things really start to get exciting. We can work together to focus your goals on a shortlist of investment properties and begin to do some due diligence.
Things move pretty fast in this stage now that the Perth property market is heating up – so we’ll save purchasing tips for a future post.
Multiply Property Group: Perth’s boutique property investment partners
Property investment is a personal journey as much as financial. Your lifestyle aspirations, financial goals and family plans have a significant bearing on investment decisions, so it’s important to work with a buyer’s agent you can trust on a personal level.
The team at Multiply Property Group are here to help you achieve your goals. Our greatest satisfaction comes from seeing clients work towards their goals, whether that means financial freedom or a flourishing property portfolio.