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The 10 Golden Rules of Property Investment

rules of property investmentIn an article for the Property Update, Michael Yardney focuses on 10 golden commandments or rules of property investment.

10 commandments of property investment

  1. Conduct Due Diligence to look into the risk-benefit equation and also figure out your risk profile before investing in a property.
  2. Think of the cash yield all the time. For achieving high yield, try to minimise your capital investment.
  3. Aim for 7% annual growth over the course of 10 years.
  4. Have an iron grip on your portfolio but don’t own anything. Those bit by third-party injuries will know how liability insurance fails to cover an investor at times. So, own nothing (in your name) but structure your portfolio in a way that you get to control it solely.
  5. Don’t miss out on gaining from tax deductions. Understand how negative gearing works. How plant and equipment depreciation works. Obtain a scrapping schedule while undertaking renovations.
  6. The importance of income protection, mortgage insurance, and landlord insurance cannot be overstated. Make sure that you are fully insured against any ill event.
  7. Take an all-encompassing look at your income stream. Don’t ignore capital growth even if your mind is clearly on rental yield and subsequent positive cash flow and don’t overlook yield even if your strategy is bent towards negative gearing.
  8. Go for assets which do not require your considerable time or energy and can be beautifully handled by your property management team.
  9. Whether it be through extended settlement or off the plan purchases, look to maximise growth with minimum upfront investment.
  10. Seek renovation-worthy properties.

You can read the original article here.

Not making emotional investments should be no. 11

The commandments as listed by Yardney are very legitimate and quite helpful. However, limiting the rules of property investment to 10 can be, well, limiting. There is just so much a property investor has to learn before succeeding in this field. There is a telling statistic that says only 9% of investors make it to their fourth property. So, what’s the problem with the remaining 91%?

For me, the problem is that habit that sits at the top of the equation called emotional investment. When this happens, we tend to buy properties above market value or tend to hold on to them even after we have conceded to ourselves that we are in the wrong.