What savvy buyers do before they buy a property

February 12 2021
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Before cashing out on a property, buyers of all ages and experience levels are encouraged to have a comprehensive plan in place that caters to several key elements.

What savvy buyers do before they buy a property

Extensive preparation is key when approaching a property purchase, and online finance calculators don’t count, Pure Property Investment’s Paul Glossop said on a recent episode of The Smart Property Investment Show.

“It starts with preparation because it doesn’t take much to jump on an online finance calculator and say here is my income, here are my debts, how much can I borrow? That is not a strategy,” Mr Glossop advised.

According to Mr Glossop, a top-notch strategy answers several key questions.

“What you really want to be thinking about, whether you’re 20 and buying your first investment, whether you’re 30 and buying your first investment or already buying or bought a home, or you’re 40 and looking at leveraging into multiple assets, it comes down to understanding what are you buying and why are you buying it.

“How does this fit into any other assets you might have and trying to think about the considerations of where your equity sits, where your other portfolio may sit, land tax considerations, exposure into certain markets, as well as what your paydown time frame instructions look like,” Mr Glossop explained.

The next most important element to deliberate is finance.

“How do you structure your finance best because in these types of markets, and I’m talking a good two- or three-year growth cycle, we want to see people prepared,” Mr Glossop said.

He encouraged multiple purchases, but only if the finances are sufficient.

“Prepare your finances accordingly to say go and strike and strike accordingly. The last thing you want to be doing or thinking is that you may have capacity to go and buy two or three assets over the next three years, but that actually might be possible here and now,” Mr Glossop explained.

But the big catalyst, Mr Glossop said, is planning for changing circumstances.

“Consider what happens when the interest rates go up. Consider what happens when the market cools down, because the guarantee is that, as sure as the sun rises in the morning, we’re going to see a growth cycle, we’re going to see a flat or sideways cycle, and we’re going to see a negative cycle over the next 10 years.

“Don’t get caught up in the moment... You need to know that your cash flow is OK when that market goes backwards or when the interest rates go up,” Mr Glossop advised.

“Am I OK if I lose my job? Am I OK if we have a baby? Am I OK if I choose to retire? They’re the things that make people better investors as well as far more successful long-term investors.”

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

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