One of the first steps to creating wealth through property is ensuring that your personal finances are well-organised. It’s important to have specific and realistic financial goals. You also need to be acutely aware of your spending habits and be able to develop a budget and stick to it.
The goals that you set need to be realistic and achievable. It is always a good idea to break a long term goal into smaller, achievable goals and your long term goal won’t seem like such a daunting task. When we talk goals with our clients, we talk 1 year, 5 years and 10 years and work to develop strategies that can assist our clients to achieve their property investment objectives.
Remember to reward yourself along the way. Staying motivated is key to keep momentum going and to keep you moving forward towards achieving your goals. Little rewards like dinner at your favourite restaurant or that weekend away you’ve wanted will help to keep motivation high.
To enable you to determine how much you have to spend on an investment property, you need to be able to budget. Knowing what you spend where and how to cover big costs such as car registration or renewal of insurance premiums is a good start. There are lots of tools freely available online to assist you to create a budget. The hardest part is sticking to it.
A good budget helps to:
- Save your deposit
- Create a regular savings habit that lenders love to see
- Allow a buffer for life’s unexpected costs without having to dip into your investments
Determining how much you can afford to put towards an investment property is crucial. However, make sure you think about the ‘extra’ costs involved in purchasing a property that get added on top of the purchase price. These include but are not limited to:
- Stamp Duty on borrowings
- Legal Fees
- Landlord Insurance
When purchasing a property never commit your entire savings to the purchase. This is unrealistic and could place you under financial pressure at a later date. You always want to have a reserve for things like: unexpected maintenance, interest rate rises, property vacancy, property rates. Property is often most profitable as a long term investment, therefore being forced to sell due to sticky financial situation will not play well in your ‘wealth building’ strategy.