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7 Budgeting Tips for First-Time Property Investors

When planning your first purchase, you want to be sure you’ve developed a sustainable property investment budget and one that you can realistically follow.

Budgeting is a simple concept and is vital in property investment, as it helps ensure you are spending less than you are earning.

It helps you balance your income and expenses and ensures you take a positive, proactive approach to managing and building your portfolio, whilst treating your property investment as a business.

Here is a list of seven budgeting tips to help you achieve financial success in your first property investment, which can set you up for a long and prosperous property investment journey.

1. Plan specific goals – both long and short term

The first step of budgeting for property investment should always consist of setting goals, both in the long and short term.

A useful way of making goals more powerful is to make them SMART, which stands for:

  • S- Specific
  • M- Measurable
  • A- Attainable
  • R-Relevant
  • T-Time-bound

Goals can help to combine your acquired knowledge and experience and provide the focus that you will need to make the very most of your property investing journey and achieve long term and sustainable wealth.

Planning goals in the long-term is important because it puts your first property investment into perspective and sets the general strategy that you want to follow.

For example whether you intend to purchase properties for their long term capital growth or positive cash flow.

Set short-term goals as well. Short-term goals should be achievable within a year or less, but always be prepared to adjust for changes and set new goals along the way.

2. Know your salary and income

Knowing your exact salary and income is the framework of your budget and allows you to put your goals into action.

Be sure you know your gross salary, the amount of money you earn before tax, and the net salary, how much you take home after tax is deducted.

Miscalculating this seemingly obvious step can easily set your budget off track.

Knowing your borrowing capacity is a crucial step, which will take into account what you can currently afford based on:

  • Your annual income
  • Your monthly expenses
  • The type of loan and current interest rate
  • Repayment type
  • Loan Term
  • Estimated repayments

3. Investigate the property

Do your research and due diligence and organise a thorough investigation of the property’s condition in order to avoid unforeseen costs you did not budget for or necessarily afford.

Consider using a well-qualified inspector who can give you valuable feedback on the property.

This fee needs to be put into perspective, and it could be a small one compared to the potential costs you could save yourself in the future. You can get a free, no-obligation building and pest quotation here.

If there are any major repairs, plan your budget accordingly using a one year or five year maintenance plan.

If you plan to renovate the property in the future, you can download our free renovation budget calculator here.

4. Break down the costs of buying investment property

Property investment is a popular wealth creation vehicle in Australia and has the potential to provide you solid financial returns. Be aware of these upfront and ongoing costs when considering any property investment purchase.

This list is not exhaustive, but provides a good starting point of the costs of buying your investment property that you will need to cover.

6 tips on saving for a property deposit

5. Research the market

Adding market research to your budgeting process is another valuable way to analyse your property’s value and performance amongst its field.

Researching the market ensures you are up-to-date with changing prices and market movements, and helps ensure you are investing in areas that will give you long term returns whilst preventing you from making a decision you could live to regret.

6. Track your spending against forecasts using a reliable system

Once all the above tips are checked off, be sure to constantly track your spending habits through a reliable system.

Fortunately at Real Estate Investar, through our Portfolio Tracker tool and partnership with Xero, the market-leading cloud-based accounting software, you can easily track and account for your property investments and portfolio performance.

Portfolio Tracker and Xero can help you with your cash flow planning and financial management, so you know how each property is tracking against its forecasts. Watch this quick video to learn more.

7. Update and adjust your budget

Continually adjust your budget on a regular basis to account for any changes caused by the condition of the property or the property market.

Remember that property is a long-term investment and as you build up equity, you can consider purchasing further property to add to your portfolio.

Thanks for reading as always, please give us any of your own budgeting tips in the comments below, we would love to hear your views.

Real Estate Investar Editor
Real Estate Investar Editor
Real Estate Investar provides intelligent software, tools and data to help you save time and make money in the residential property investment market.

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