Photo by Tierra Mallorca on Unsplash
Are you interested in building your spare money into something that you can retire on? Then you need to consider investing, maybe even consider an investment in property.
Investing is an essential in any recipe for life long success.
If you want to be financially free and gain back your time to use the way you want, you need to make your money work for you.
To learn how to start your investment journey, particularly in property, read on.
So How Do You Start?
There are so many investment options that it’s hard to know where to begin.
We found the easiest investment to begin in was the stock market. It’s fairly easy to understand and you can start with relatively small amounts of money.
That’s where we started, and if you are not an investor that’s where we would recommend you start. You should learn and invest as much as you can and start to grow your money.
To learn more read How to Achieve Financial Freedom Through Investing.
The Next Step: Investment in Property
However, now that we have spent about two years investing our small money, little by little on the stock market, we’ve started to build our little nest egg into a pile of moderate money. It’s not big yet, but it’s growing and we’re learning the game.
Now following the lessons of our millionaire mentors, we’ve decided that diversification and perhaps broadening our risk profile may bring in some greater growth to our valuable capital.
In short, it’s time to think a bit bigger and scale up if we want to get greater returns.
(Disclaimer – these ideas are based on our personal experience and do not represent professional investment advice – see disclaimer below.)
Starting our Investment in Property
Property is the Oldest Value Investment there is. It offers all forms of wealth creation and is generally a safe and stable asset class.
How to Invest in Property
We’re not experts when in comes to property investing. In fact we are rank beginners. However, we know the basic understanding of investing and we’re going to apply it to property.
We started with learning about value creation. You may have read our last article on investing in property. (Understanding Property – Investing Made Easy)
Based on that, we decided the first place to start in property is to ask what wealth creation are we looking to go after?
What is your approach to investment in property?
What type of wealth creation you will look for will depend on the level of capital, the opportunities, and the specific goal of investment.
If you are very clear on these areas, then you will know what type of property investment will suit you. Is it income from rentals, capital gains from raw land, commercial developments or amortization?
To answer this question you need to look at the size of investment you are able to make.
1. Capital for Investment in Property
So if you are like us, starting with relatively small money and not very keen or capable of gaining access to large loans to leverage our position, you need to look small scale raw land or developing land deals to begin with. The idea would be to get a piece, or a share in a piece of land, that will be developed. You buy, hold it for the time it needs for demand to kick in and then you sell, making a tidy profit.
This can obviously be risky, and you need to do your research, or have a great network to help you evaluate the good deals. However, though you start small you can win relatively big if you pick the right deals.
If you have a moderate amount of capital, or you can access it by way of a loan, then you will have access to more opportunities. You may want to buy a rental apartment or a duplex or house. This option provides rental income and also the potential of a capital gain in the long run.
However, there is a lot more hands on work with running a rental property. Things such as maintenance, repairs, vacancy, are big issues to consider. If you are in a position to take on this investment, it will mean learning how to evaluate and manage a rental property.
Nonetheless, it has been done by many and I’m sure it’s not that difficult.
For us, this would max out our investment capital, but it is something that we have given serious consideration to.
Disregarding the many other alternatives in and around these, the last we will mention is the big money approach.
If you have big money already, well you probably know what you are doing. For me, if I had the big money, I would look to diversify across these different types of investments to develop a steady stream of income from safe rental properties, while at the same time allocating some money to potentially higher returning property development investments.
The Really Big Money
And if I had the really big money, the Trump level money, I would look to scale up and diversify even further by adding commercial property, hotels, resorts and so on.
So you can see, depending on the level of capital you have, you will have certain options available. You can also see how one might start will the little money and work one’s way up, step by step, to obtaining the very big money.
For our beginning investment in property
Given we have a moderate amount of capital, we’re not looking to buy a mountain of safe low yield properties and rest easy living off the tide of rental income flowing in. (One day, maybe) We’re also not dreaming of chipping in on anyone’s massive amazing 5 star hotel. Our amount is not going to allow for that.
However, even with our small money, we still have options. So what are the opportunities for a first time property investment with little to moderate money?
2. Opportunity for investment in property
So with this modest level of capital, and at this stage limited to growing our money naturally without the aid of financing, we went looking for what options we had available.
A quick note: while many of you may have access to financing, we currently don’t, given our specific situation. However, we kind of like the challenge to see if we can get by without the need of debt. We want to see how far we can go “naturally” for the moment. However, don’t get us wrong, there is nothing wrong with the right kind of debt, and when we are in the position to use it we will.
Seek and you Shall find
Once you have an idea of how much you can invest, the next step is to actively start looking.
And we don’t mean think about it and get upset that everything is too expensive. Or check out one or two options and just throw your money at it and hope for the best.
You need to look actively and intelligently.
Actively means you are daily looking for deals in your price range; scouring the sites and looking for opportunities that are around you. You are also speaking to agents and getting pitches and offers. And you are not just looking at the big number and then going on feeling. You need to be actively looking for the areas of growth in this investment and what factors could potentially lead to growth.
- The supply and demand dynamics of a particular location.
- How fiscal inflation is behaving.
- The interest rates banks charge for home loans, meaning the cost of borrowing.
- The development of new infrastructure or other new real estate market drivers such as schools, shopping malls, airports or increased public transport facilities in a particular area.
- Growth in local population, leading to increased demand.
By looking at these factors in relation to each opportunity you can start to evaluate whether the property has growth potential or not. And whether it will make a good investment.
Asking your Network and Mentors
And as you are looking and asking and evaluating, you will start to notice the people and agents in the field that you like to work with, and the ones that like to work with you. As you develop experience, and you spend more time ‘on the job’, you will build contacts and relationships in the field.
These contacts will become your valuable network and when you find one or two who you respect as being very successful and knowledgeable in the field, then you may have found a good mentor that will help guide you to good options, teach you the game and work with you to achieve your goals.
This process we came to very naturally, however, it appears to be a good approach to anything. Start to actively search, build network connections, develop relationships, find mentors, follow them and work with them and learn the game.
How to decide
Once you have established your opportunities, it’s time to decide.
You should take your time with this decision and do your due diligence. You need to run your calculations and take time to weigh all your options very carefully. At the end of the day, the main thing that really helps to decide, is being really clear on your goal of investment.
3. The Goal of Investment in Property
What is your goal for this specific investment?
Is your goal slow safe returns? Is it explosive growth and fast returns? Are you looking to enjoy developing your investment? Or are you more experienced and you are looking for tax offsets or access to leverage against your asset?
Your goal will decide what you end up investing in.
As stated already, we started small and we wanted to slowly build our money through safe reliable stock investments. We did that and it worked fairly well over all.
Now we are branching out into land, our goal is very clearly diversification and increased return.
If we want to diversify, that means we want to keep some of our money in the stock market and use some of it to diversify into land. So we aren’t going to sell out and put it all down on a rental property yet. Though in the long run, when we have more capital to play with, we will certainly be looking to develop a stream of rental income. However, that will have to wait until we have the level of capital to park it in safe rental properties. (And when we know a lot more about how to invest in this class.)
We are also looking for a higher return. We’re very weary of getting too greedy and we’re always aware of the risk. So we’re not investing in speculative stocks or small cap startups. At this stage we don’t have the time to devote to studying these risky plays so that we can make intelligent moves.
No, we’re looking for a modest step up, but we are hoping for a bit more than we have been getting from playing the safe stocks. One day when we have more capital to play around with, and when our portfolio is primed for that level of diversification, we may well look to add more riskier investments in the hopes of truly explosive returns. However, at the moment we don’t have the capital to risk.
We are not looking to go all in on high risk, high return, just yet, but we are hoping to chase the hot property returns we have been seeing in recent years, in this particular context.
We are well aware of the risk of chasing hot trends, so this may be a mistake. But here we’re following fairly trusted advice; the advice of people who have been working this investment for some time. They have been making great returns and we’re simply following their playbook.
And that playbook has led us to small parcel land developments. They are small and require only a portion of our capital, which ticks the box for diversification. But they are part of a bigger development, and as the land begins to be developed, and the area around the land, we are hoping to see a greater demand for our small parcel, and therefore a higher price. This is the goal, however, we are well aware that nothing is definite in investing.
So that’s the process we took to get to our first investment in property.
- Evaluate your available capital
- Actively look for opportunities (and develop networks)
- Clearly define your goal for investment
Hopefully this has helped you to see how you can take an average salary, save it into a small pile of money, invest it safely and turn it into a moderate amount of ‘capital’, and then to plan a path to success were the ‘sky’scraper is truly the limit.
We also hope that by seeing our thought process you too might be inspired to see how easy and advantageous it is to take control of your future by becoming an investor. And hopefully we have shared some good advice and modeled the right ideas about evaluating and considering investments.
If you found it interesting, consider follow along with our mission for success.
Mission to Success
The mission for success is to take our life to the level of awesome. We are actively learning the lessons that will bring us more success, that will improve the future for our children and will help make the world a better place.
If that’s something you want for your life, feel free to come join the mission for success by clicking here: Mission for Success!
All the best, and remember to keep striving for success.
This Blog is created and provided for informational and entertainment purposes only. Under no circumstances does the information presented on this Blog represent a buy, sell or hold recommendation on any security. The information in this Blog constitutes the Author’s own opinions and experiences. It can not be considered expert advice. None of the information on this Blog is intended to provide any tax, legal, investment or trading advice. Nothing provided through this Blog constitutes a solicitation of the purchase or sale of securities or futures. In reading this site, you understand that the Author is not advising you personally concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter.