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The Sun-Herald

How to pick the right time to become a property investor

Market conditions are an important consideration when looking to enter the market but you have no control over them. When considering investing it is wise to focus on the factors you have some level of control over; in other words, your personal and financial circumstances.
The most common mistake property investors make is not being able to hold the property and being forced to sell before the asset has realised its full potential.
To determine whether you're in a strong enough position to buy an investment property there are some important factors to consider:
Income The best time to invest is during your peak earning years when your income is steady, or preferably, increasing. You should also have a reasonable expectation of earning this income on an ongoing basis for at least seven to 10 years.
Before you buy, think ahead to any possible personal commitments you may make over the next seven to 10 years. If you're likely to experience a drop in income due to maternity leave or higher expenses due to home renovations or school fees, you'll need to consider how these could affect your ability to meet your loan commitments and other property-related expenses.
Debt Before you invest, it's sensible to reduce your non-deductible debt as much as possible. Non-deductible debt is debt you can't claim against your taxable income, such credit cards, car loans, store cards and the interest on your family home. There's little point in taking on more debt by way of an investment property, if your current debt levels are already stretching your financial resources.
Gearing Only buy an investment property when you're gearing (borrowing) to a level at which you can comfortably meet repayments even if interest rates go up. There's no 'ideal' gearing level; it depends on your individual financial circumstances and risk tolerance.
In short, there's little point jumping into an investment if you don't have the capacity to hold the asset for the long term and benefit from its full potential. The 'right' time to invest is when it's the right time for you.

Mark Armstrong is a director of Property Planning Australia propertyplanning.com.au