7 questions to ask when investing in property
You’ve made the decision to invest in property and you’re keen to get out there and buy.
It’s a very exciting time, for sure. But investing is best done with the head, not the heart, so being armed with the best available information will ensure the decision you make will give you the best chance of securing a good return on your property.
Here are seven questions every savvy investor should ask before buying:
1. How much can I borrow?
A surprising number of people go to the trouble of selecting a property only to discover they don’t have the means to buy it. This is a waste of everyone’s time and a source of heartbreak. Before you hit the road in search of that great investment, chat with your lender and run through the figures so you know exactly what your borrowing limit is. And don’t forget to take into account ancillary costs like stamp duty and agents’ fees.
2. What sort of property do you want?
Having a clear idea of your requirements will help you narrow down the search field and save you time. Are you after an apartment or a house? There are advantages and disadvantages of both. Do you want a property that is ready to lease or do you want one you can add value to in a chase for higher rent? How much maintenance are you prepared to do? Draw up a checklist and be rigorous about only considering those properties that fit the bill.
3. Does the property you want to buy have a long-term tenant?
It may be to your advantage to have someone renting your new property for an extended period from the day you take ownership, or it could be a source of immense frustration. Either way you need to know before you sign the contract.
4. Can I see the flood plan?
So many of our major population centres are built on flood plains, and councils should have a comprehensive flood plan which indicates whether your property is susceptible to inundation. It is vital that property investors check this information so they are aware of the risks.
5. What is the likely rental yield?
Buying, for instance, an apartment in an area packed with apartment buildings, or a small house that only has one bathroom and no off-street parking, has implications for your investment strategy. In the case of the former, a large supply of similar housing and nothing to differentiate your property from others, you may struggle to achieve the returns you seek. The latter means you might struggle to find tenants unless you drop the price. Make sure the property you buy will attract the returns you need to service your loan.
6. Are there any future developments planned for the surrounding area?
Any good real estate agent should know the answer to this question. You don’t want to buy a property and congratulate yourself over how cheap it was, only to discover there’s going to be a new prison built next door. Conversely, many developments can add value to your new property, for instance a transport hub or shopping precinct. You can check with council what development applications have been submitted for your area.
7. How big are the rooms?
It can be easy to overlook the basics if you are dazzled by other factors like price, exterior or location. Are the rooms big enough to fit in a double bed, kitchen table and some decent couches? How about storage space? Get out the tape measure if necessary.