A smart, well-timed investment can set the foundations for success. Patience, knowledge and strategy are key in knowing when to make opportunistic decisions. Because sometimes the best investment is the ability to have choices and freedom.

These days the idea of buying a house to live in, while creating wealth over the next 20 or so years, is a crumbling idea. It doesn’t provide the flexibility so many of us desire and it actually costs a lot more than you think when you factor in interest, the new hot water system, the new this, the new that – you get the idea.

Rethinking this outdated tradition means that you are exposing yourself to a number of other financially sound options. One of which happens to be purchasing an investment property, an income-producing asset. It could also mean investing in equities or pursuing some sort of entrepreneurial venture. The key is to grow an asset base as large as you can with the money that you can afford. It just so happens that the foundation stone of the wealthy usually is built upon property.

So, boiling things down there isn’t a lot of difference between buying an investment compared to an owner-occupied residence. The process is pretty much the same with the exception of a few tweaks like:

  1. Financing arrangement – give consideration to interest only loans and borrowing enough to cover purchasing costs as they can become a deduction. Obviously, this will be dependent on your finances and a good broker will help navigate this.
  2. Growth vs. income – it’s pretty likely you’ll need both. But you may need to place a preference for one over the other. Income means cashflow and is the lifeblood of any successful investor. Capital growth over a long sustained period means financial freedom.
  3. Loss of incentives – purchasing an investment could mean that you become ineligible for the First Home Buyers Grant. It may even mean losing additional concessions and interest rates will also be marginally higher. That why you should seek;
  4. Consultation with professional advisors – buying a home normally equates to seeking guidance from friends around the BBQ or Mum and Dad. Nothing wrong with that but it does pay to seek guidance from professionals. It’s a plural because you should consult with a property investment advisor, mortgage broker as well as an accountant. Get advice on the strategy that aligns to your risk profile. Actually determine what your leveraging position is and have it stress tested. Finally, know the tax implications and work it to your advantage.

Purchasing a property for investment purposes requires a business like treatment. The emotions need to be removed and speculating or leaving things to chance could spell the recipe for disaster. If you get your first purchase right it will become the foundation for growth.

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Peter Mastroianni is a property finance expert and the co-founder of Loans Only, specialising in investment lending. He is the author of two top-selling real estate books and host of The Rentvesting Podcast. Peter is passionate about supporting the next generation of investors rethink the traditional home ownership model. He does this by championing the 'Rentvesting' strategy through www.rentvesting.com.au.

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