Investing in property can lead to financial freedom. But what isn’t obvious to ordinary Australians? How to make it happen.

Ben Kingsley – coauthor of The Armchair Guide to Property Investing and host of The Property Couch podcast – teaches Aussies how to be successful property investors. He says that it is all about research and realism.

Kingsley is a leading expert in property investment and the founder and managing director of Empower Wealth. He explains the five steps.

Get your money organized.

Kingsley explains that although it seems obvious, the first step in separating “surplus money” from cash already spent within a household is crucial.

Realistic estimates of the amount they can afford to invest in property are essential for potential investors, and it is important to have a realistic budget.

Kingsley states that property should be considered a long-term investment. People shouldn’t just look at it as a short-term or medium-term purchase.

Calculate what you can afford; today and tomorrow.

Kingsley advises that you always project ahead when doing your sums.

As property investment is a long-term commitment, investors need to know what they can afford.

Choose between yield or growth investment.

Next is deciding which investment style is best, as different properties perform differently.

Growth refers only to the potential value over time, and it can also be “realized” by selling. Yield investment is a measurement of how much a property could make an investor in rent on an ongoing basis.

The gross rental yield is calculated by taking its annual rental income and dividing it by its property value. Next, multiply it by 100. A property that earns $375 per week in rent bought for $450,000 returns 4.3 per cent. These figures do not include expenses.

Investors can earn hundreds of thousands more each year through future capital growth. It is up to you to decide which method is best.

Kingsley states, “If you look at the long-term, which is indefinitely, and you are getting incredible cash flow from a home unless your debts are being paid down, why would anyone sell the goose that’s laying a golden egg?”

Research, don’t search.

Kingsley states that while it is easy to be seduced by the many beautiful properties on realestate.com.au, serious property investors need to research and not just search aimlessly.

“Don’t get distracted by browsing. You need to focus on the fundamentals of supply-demand and find an area that allows capital growth, and the value will rise.” He says that location is almost always important.

“You are studying human behaviour. What makes people choose to live in certain places? What is it? Is it prestige, amenity or some other quality? What makes it so valuable? This is what you are looking for.”

Kingsley says it is important to understand “what your money can buy in an area” and then find the best asset in that area.

Attract owner/occupier appeal

Kingsley states that the best properties are those with owner/occupier appeal. It’s therefore logical to search for this when property hunting.

It becomes an aspirational asset if many people love it, no matter what the reason. It is appreciated and desirable, and then it becomes an asset that increases in value,” he said.

If you are unsure, consult a professional.

Kingsley states that investing can be complicated and that sometimes professional advice is a good investment.