December 8, 2010 | Author

Author Julie Hanson

I thought it would be useful to give you a short exerpt from Paul McFaddens Property Jumpstart training.

Hope you enjoy it!

The 7 Golden Rules of Property Investing

By following the 7 simple golden rules, you will minimise the risk when investing in property. The following rules will ensure that you do not lose money by making bad investment decisions….

Research, research, research! Always do your due diligence!

It is essential that you stick to your buying strategy and never deviate from it. By keeping this discipline you will always make good investments and minimise the risk. It is vital that you do enough research to ensure there is zero risk in the investment you are about to make.

Stick to the basics!

The key is to keep the fundamentals in mind at all times. Location, type of property, rental yield and so on. More on this as we go….

Always buy Property at a discount (Below Market Value / BMV)

When buying property, you’ll want to buy at a discount, preferably from motivated sellers, people who need to sell their property quickly. I will discuss in more detail why you should target these type of sellers and the solutions that you (the investor) can provide to help them with their problems. Buying below market value will give you a buffer in case property prices happen to drop any further. By buying below market value you are significantly reducing the risk of losing money in the short term. The huge benefit with buying below market value is that you are locking in profit from day one. You won’t want to wait for the property to increase in value in order to make money; you want to make it straight away as you buy.

Always buy in an area with a ‘high rental demand’

There is no point in buying a property only to find out that you cannot rent it out. Make sure you do your research in your chosen investment area and make sure there is a demand to rent. One of the biggest mistakes that amateur investors make is buying purely because there is a big discount. Regardless, if you buy a property 60% below the market value and you cannot rent it, then you will be left paying the mortgage and the other expenses that come with buying the property. You may think this is blatantly obvious but you would be surprised how many amateur investors get distracted because of the big discount. The facts don’t lie, do your research and never buy with emotions or by being lured with big discounts. More on finding high rental demand areas as we go….

Buy for cashflow

As I’ve mentioned already and will continue to do so throughout to stress the importance of cashflow – always buy property with the view that house prices will never increase. Having this mentality will help you make sensible decisions by looking at the figures to ensure your investment will provide you with a positive income. Never ever, ever buy with emotions. Follow the system and buy for cash flow. An asset is something that puts money into your pocket; a liability is something that takes money out of your pocket. With this in mind, you want to buy an asset that will give you positive cash flow.

Invest in property for the long term

You make money when you buy property, not when you sell. If you sell a property you are transferring your wealth to someone else. Now I do believe in selling property to give you a cash injection to reinvest in another project or….fill in the blank. However, keep in mind that if we follow past trends and we know that property prices double every 7 to 10 years, then we know our properties will increase in value over time.

Side note: It may take longer than 10 years at this point in time, because we are in one of the worst recessions our economy has experienced.

Have or build a cash reserve

This one can be tough especially if you are starting off without a penny to your name. The aim is to build a cash reserve as quickly as possible as you move through your property journey. In the beginning of my investment career my cash reserve was credit cards and overdrafts, not ideal as it was a high risk strategy, but thankfully I stuck to the rules above that have served me well and continue to make my property business very successful. If you do not have a cash reserve set aside, then I strongly suggest you either find someone to partner with who has cash; or save any profit made from your property investment. The purpose of a cash reserve is in case of an unexpected cost such as a boiler having to be replaced, increased interest rates etc

If you stick to these rules, I can guarantee you will have a very successful and profitable property investing career. As we continue through Property Jumpstart © I will cover each of the steps above in greater detail.

Visit – Property Jumpstart training to find out more about Paul and the Property Jumpstart system.