So, you're thinking of buying your first residential investment property?
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There are a few things to consider before making the move. Here are my top 10 tips for avoiding potential difficulties and ensuring success.
Know your goal
Understanding your financial objectives is key to finding the right investment property. First, decide what your investment goal is and then create a plan to achieve it within a realistic time frame. Are you looking for a plan for retirement?
An income-generator to fund your children's education? Or building equity to gain a regular income? Define a plan and review it regularly as your situation and the market changes.
Research
Understand which property is going to work best for your situation. It needs to be one that will be of high demand from renters and, possibly, owner-occupiers down the track. Be sure to research which types of properties are in demand and rents quickly in particular areas, and those that don't. Get to know the neighbourhood you're planning to invest in!
Old or new?
Should you buy a renovator's delight or something you can rent straight away? It's great if it can be rented as is, but potential to renovate should also be considered. The ability to easily add value to a property is a plus, as it could increase rental returns.
Location
Location is critical to performance. Things to consider include: how far to the CBD or business areas? Are there schools nearby? Can tenants walk to local shops? Where are the public transport options? Are there cafes, a medical centre, pharmacy, gym nearby?
Do your sums
Always check your finances before deciding to purchase. Get pre-approval and make sure you can cover repayments as well as extra costs (conveyancing, inspections and taxes). There are also ongoing costs including landlord insurance, strata and property management fees, maintenance, council rates and utilities.
Right setup
It's important to understand how to set up the purchase to receive the most benefit. The entity should be tax-effective and protect existing assets. Expert advice can help maximise benefits.
Right features
You want to appeal to the highest number of tenants, so look for properties that offer that little something extra, like a second bathroom or lock-up garage.
Check emotions
Remember, you won't be living in this home, so there doesn't need to be an emotional connection. Your decision should always be about which property will give you the best return.
Timing's key
Keep on top of the market's movements and its dynamics. While there are investment opportunities available most of the time, some market conditions are more favourable. Do plenty of research. If you don't fully understand it, ask for help.
Expert advice
A mortgage broker can put you in touch with experts when it comes to real estate and investment. This means accountants, real estate agents, solicitors and valuers.
Olympia Andronicos is a credit representative (507463) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). Choice Finance Specialists 0418 690 628.