Top 5 for new investors

[Gerrard]

I'm interested in what everyone thinks are the top 5 things new investors MUST understand or be clear on before they dive into property investment.

I can immediately thgink of 3 (in no particular order):

1. Understand own goals and motivations for getting into PI
2. Have a defined criteria for properties
3. Have a broad understanding of financial and legal matters related to PI

I'm sure there's going to plenty of different ideas out there so by all means questions other people's top 5, but don't just shoot them down.


Gerrard

[Glen]

Passion!

People will do many things in a way to be successful and to make money, but unless you are passionate about what you are doing, and love what you are doing, then there is probably less of a chance that you will succeed.

[RentMaster]

In the current and anticipated future economic climate I think a good knowledge of cashflow calculations are required.

What is their current cashflow situation. How much can they afford to put into property on a weekly basis if they had to.
Also the cashflow profile of the property they are going to buy. It is probably going to be negative. But by how much?

[revdev]

Even if you intend to use a Property Manager, a basic understanding of tenancy issues and the RTA.

[Traff]

Criteria

Understand your area,market values that are applicable.

[Gerrard]

Great answers everyone - keep 'em coming.

Gerrard

[Gerrard]

And here's a post m,ade by SuperDad earlier this year on a very similar subject:

http://www.propertytalk.com/forum/showpost.php?p=43716&postcount=1

Hi All,

I thought I would start a thread on the 'top 5 tips for newbies'.

As most of you might know (or suspect), I am quite new to PI. I have only recently gone unconditional on my first IP. I have been reading on PI for two years, now, and believe I have learnt a bit along the way. I wanted to share what I believe, at this time, have been the 5 most important things I have learnt on my journey to date. Hopefully others can pitch in, newbies and seasoned investors alike, and contribute to a resource for people new to PI.

So here are my "top 5 tips for newbies", based on what I have learnt so far.

1. Find people who are actively investing in property, and who are passionate about property. Your local property investors association and Property Talk are excellent places to find such people. Don't be afraid to ask questions of these people, no matter how silly you think the question might be.

2. Clearly indentify why you want to get involved in property investment, and what your goals in property investment are. Make sure the goals are quantifiable (e.g., I want $2M net equity in 10 years time), not simply "I want to get rich. Your goals will determine your strategy. (Thanks to Poomba for this one.)

3. Form and foster relationships with people who can help you in PI. These include a good RE agent, a mortgage broker, a lawyer, and an accountant. Don't forget your important personal relationships - family and friends.

4. Come to grips with fear. This is not simply a case of "conquering fear". Some fear is good - it is a subconscious reaction to real and present dangers. Other fears are simply the result of irrational prejudices. I have found that the trick to coming to grips with fear is learning to know the difference between the two. I have also found that this is not easy!

5. Don't be in a hurry (unless your investment goals require you to be in a hurry). You won't miss the property boat, because the property boat never departs. This is not to say that one shouldn't move quickly when the situation dictates - but if you move quickly, also move wisely. For example, if you put a quick offer in on a property just to get it under contract, make sure you have an escape clause.

I've learnt a lot more than this, but these are the "big five". I'm hoping that I can learn more from others who contribute to this thread.

Good investing,

Paul.

[Monid]

Some suggestions:
What their strengths are and then what sort of plan suits them.
A viable exit strategy.
Know when to hold them, know when to walk away, know when to run.
How to spot a lemon.
How to turn a lemon into lemonade.
An open but critical mindset.

[Gerrard]

And another 2 from me:

1) the good deals are made not bought
2) persistance - unless you consistently put in a good effort directed in the right places it will never happen

Gerrard

[Scott Miller]

Get yourself a good broker, even if it's only to ask those newbie questions too.

Most of a brokers job is ensuring the client is set up correctly. I'm quite happy to tell a client if a property deal is good or not. At least then the decision is up to them.

[Glen]

Get yourself a good broker

How can you tell whether they are a good broker though Scott?

Would it be preferable do you think, that said broker would have to be actually investing in property themselves (as a minimum), or just by word of mouth recommendation?

There's plenty of so called brokers, financial advisors, life coaches etc out there that think they're shit hot, but don't even practice what they preach, wouldn't have a clue, and are worth two fifths of bugga all!

[Scott Miller]

How can you tell whether they are a good broker though Scott?

Would it be preferable do you think, that said broker would have to be actually investing in property themselves (as a minimum), or just by word of mouth recommendation?

There's plenty of so called brokers, financial advisor's, life coaches etc out there that think they're shit hot, but don't even practice what they preach, wouldn't have a clue, and are worth two fifths of bugga all!

Excellent call Glen,

I think a lot of your concerns regarding brokers/financial advisors etc can be eliminated by asking the very questions you put forward here. It's you that is putting your faith in a professionals ability, so ask them every question you can think of.

I tell all my clients/potential clients to surround themselves with an investment property team. An investor's solicitor, accountant, agent(s) and mortgage broker should all be property investor minded, a weak link in this chain may not initially show itself, but in the long run it will scuttle the best laid plans.

Do your DD on your investment team as vigorously as you do on the purchase you are about to make!

[muppet]

Try and meet up with a few PTers.

Attend a PT gathering.

Make use of the Private Message function of PT.

[Landwatch.com]

Most important thing that an investor should know is that "Investing is risky!"

[Scott Miller]

Most important thing that an investor should know is that "Investing is risky!"

Hi Landwatch.com,

Can you elaborate on your 'Investing is risky' thoughts?