Planning your investment journey

11 Feb 2006

Last month I wrote about investing criteria. So how do you work out what your criteria should be? I wish that I could give you a simple way to work this out but I can?t. There are few hard and fast rules that can assist you, as so much of your criteria will come from your particular situation, your finances and your goals. In this short newsletter, there will be more questions than answers! Your Goals are where you should start. Hindsight is 20/20, so it?s best to start where you mean to finish. How much income do you want? What kind of properties and where? What sort of tenants do you want and will you manage them yourself? When do you want to retire and what sort of lifestyle do you want? The choices you make in your purchases will determine what sort of investing experience you have and whether you are heading toward or away from your goals and how fast. What is your Situation? Do you have the time/energy/commitment to invest aggressively or do you want to take the slower, safer route? Your preferences & personality impact what you?re good at. Property development or renovation can be a great way to make money in a short time. But if you hate pressure, like to take things slowly and don?t like managing tradesmen, then don?t do it! Your Finances will determine some of your risk profile. Once you buy property, it?s either a boost or a burden. The better the cashflow is on your properties, the sooner you will be able to buy more or pay down your debt. Every time you buy a property that has a cash surplus, you enhance your ability to borrow. Every time you buy a property that you have to prop up, you reduce it. How many negatively geared properties could you support before you can?t borrow any more? Can you reach your goal that way? Protect what you already have. Don?t be afraid to consider the worst case scenario. What happens if you get sick or lose your job? Will your properties look after themselves? Is there enough fat in them to be able to get them managed if you can?t do it? Don?t back yourself into a corner. Review your plan. Situations change, and what was working for you last year, may not be the best plan this year. Be Realistic ? Get Educated. If property is going to be your main source of income in retirement, is your plan going to provide for the lifestyle you were hoping for? Become best friends with a calculator, work out your own spreadsheets or use a pre-built one. Sure, it?s crystal ball gazing but it?s better to have some idea of where you?re going than none. Read property books or join free web sites like www.propertytalk.co.nz. They?re a mine of information and will help you become more confident in your investing decisions. Keep your Balance. There?s no point lunging over the line with your last gasp and being the richest landlord in the graveyard! Remember to reward yourself, take holidays and enjoy the experience.