If you’re considering purchasing real estate, many believe the “right” time to invest depends on market conditions. However, we take a different perspective. While factors like interest rates and the balance between supply and demand certainly influence the market, they are beyond the control of individual investors. This is why your focus should be on the aspects you can control, such as your personal financial circumstances.

Before making any decisions, it’s essential to understand that real estate investment carries significant risk. You must have a strong financial foundation to weather any unforeseen challenges. Careful planning is crucial—your investment should never jeopardize your financial stability. If you find yourself needing to sell a property before it has reached its full potential, it likely indicates that the timing was not right for you to invest.

Key points to consider before you invest

It’s important to assess whether you are in a solid financial position and able to manage risk without putting strain on your finances or disrupting your daily life. Seeking expert advice can also be valuable in this process. Additionally, consider the following key factors before making any investment decisions.

• Debt

Before you invest in something like a property, it’s a good idea to lower any debts that you can’t claim as tax deductions. These are called non-deductible debts, and they include things like credit card balances, car loans, store credit, and the interest on your home mortgage. The reason is that these types of debts don’t give you any tax benefits, so they cost you more in the long run.

If you already have a lot of this kind of debt, adding another one—like a mortgage for an investment property—might put too much pressure on your finances. It’s better to manage or reduce your existing debt first, so you’re not overextending yourself financially when taking on new investments.

• Income

The best time to invest in property is when your income is stable and preferably growing, with an expectation that this will continue for the next 7 to 10 years. During this time, it’s wise to use any pay increases to pay off the property loan, not just the interest. This helps reduce debt and allows you to grow your investment portfolio over time.

Before buying, consider any future personal commitments, self-employment, home renovations, or school fees, as these could lower your income or raise your expenses. If this could make it hard to cover loan payments, it might be better to wait until your finances are more balanced.

Additionally, it’s a good idea to have income protection insurance in case you can’t work due to injury or illness. Most policies cover 75% of your income, and the premiums are usually tax-deductible.

• Gearing

Only buy an investment property when you’re borrowing at a level where you can comfortably handle the repayments, even if interest rates increase. There’s no perfect amount to borrow—it depends on your personal financial situation and how much risk you’re willing to take. However, lenders see borrowing more than 80% of a property’s value as risky, so they will ask you to pay mortgage insurance if your loan is that high. Be sure to include this cost in your budget when planning to buy.

It doesn’t make sense to invest just because the market is favorable if you’re not in a position to keep the property for the long term and get its full benefits. The best time to invest is when it’s financially right for you.