The Importance of planning for would be real estate investors
“If you fail to plan, you are planning to fail” – By Benjamin Franklin
It is very important for all real estate investors to plan properly before you step into the investment world. Planning comes as one of the important function of any management.
I have seen plenty of real estate investors in my life time and since I have helped a lot of investors in the past 2 decades, I am summarising what have helped them to achieve their dream of getting to their final destination of “financial independence”
The landscape have changed quite a bit in the past decade or so.
Investors who bought their first home in the early 1990’s used to focus, concentrate on paying off their home loan faster. The reason is because in the early 1990’s we used to get homes around $100,000 to $150,000 in Auckland and fortunately for most of them, when the wage inflated around the mid 1990’s their income produced some surplus and this has helped many of the investors to pay off their home faster. Once they have paid off their home, the investors looked at other options and by default, leave their first home as a rental and buy a better place as a family home. These investors are typical baby boomers who have ventured more and bought a few more properties as rental and now they are selling when they are ready to retire with their retirement funds coming from the sale of rental properties. The investors in this era were also further helped with some tax breaks in the form of “Loss attributing qualifying companies (LAQC)”. Flurry of immigrants also hit NZ shores in 1995 to 1997.
The first home buyers who bought their properties in this century (after year 2000) have to look at various ways of using their equity from their first home. Traditionally, the first home buyers of this century buy their first home and pay off a little bit of principal on their owner occupied home and wait for the prices to increase and then buy their first rental. The investors in this century got advantage of the confidence given to them by the previous generation and also by this time we got more information available to absorb and make rational decisions. Also investors are more educated now and with the advent of technology, the information is available in their fingertips. This generation is also fortunate to see their home prices have almost doubled in Auckland between year 2002 to 2007, supported by migrants who came in clusters between 2003 to 2007.
In order to succeed in real estate investment, normally you need to have good analytical skills to interpret the data, some equity on your owner occupied home, importance to forging professional relationship with the mortgage broker, a solicitor, a good real estate agent, a good property manager etc. and most importantly you need to have an exit plan.
Our team in Loanmarket – Waitakere specialises on real estate investment and we draft a plan initially when we see clients in the initial appointment. The plan will initially focus for the next 15 years to become financially independent. It does not matter even if you are 55 and you have not started to look at planning for the future. We advocate that if you strictly follow up our plan, you have higher percentage of success. Our team review your financial situation once a year, which will enable you to make sure that you are in the right track. The plan starts off with the exit year and each and every review focus on this and make sure all investors are successful.
With writer’s experience in this field for over two decades, the writer can comfortably say that, the investors who have done their reviews on a regular basis are more successful in their career and achieved their financial independence within 15 years from the start of their planning activity. Since the future is very uncertain, the writer advocates everyone to plan, execute it properly and consistent review will make sure that you are going towards your financial independence.
In a nutshell, there are a lot of strategies available in order to achieve your goal of financial independence. We have to use different strategies for investors(This depends on where you are in your life cycle, your current situation and your final goal etc.). In the first instance please give me a call so that we can organise an initial meeting. Our service is free and there is no obligation, so why not take advantage of this service today.