Top 3 tips for buying an investment property
It’s an exciting time. You’ve decided to invest in property as part of a long-term plan to secure your future. More than anything, you want to make sure that investment pays off.
1. Take time to understand the market
Buying an investment property is not something you should enter into lightly. Take the right approach though, and you’ll be patting yourself on the back that you’ve created a nest egg for you and your loved ones.
If you are looking at buying an investment property, these are our Top 3 tips for making it a success:
Never rush into a property investment. Making the wrong decision could be very, very costly, so you want to be sure you’ve done your research and understand the market. You need find out how much properties are selling for in the areas you’re looking to buy in and what can you get for your money. What are the rental demographics and will the property appeal to tenants? What rental returns can you expect? What major works or developments are planned nearby? Are you buying in a boom or a slump? Attend open houses, check sales figures, read market reports and talk to real estate agents so you know when the time comes to make an offer, you’re not paying over the odds.
2. Work out your costs
The purchase price of your property is just the first of a long list of expenses it will incur. Make sure you can comfortably afford your mortgage repayments and factor in the possibility of the property sitting vacant for a couple of months.
Talk to your lender
and accountant about all the fees and charges involved with the purchase and servicing of your loan (stamp duty, lenders insurance, agent fee, annual interest cost) and also consider long-term and ongoing costs such as council rates, land tax, agent fees, insurance and maintenance. Will the home need to be restumped at some point? That’s a big expense. A modern unit might require less upkeep than an older-style home, but you’ll need to factor in body corporate fees when doing your sums. Of course expenses will be tax deductible, so make sure you’re crunching the numbers in real terms.
3. Choose your property manager wisely
Not all property managers are equal. The best will come recommended by word of mouth. A good agent is someone you feel comfortable talking to, who offers advice on property law and tenant management and acts promptly when problems arise. Unresolved issues can quickly result in angry tenants and expensive repairs. If any alarm bells are ringing after you interview an agent, keep looking. Once you’ve chosen someone, don’t rely on them completely to ensure your property is being looked after. No-one knows or cares about your investment property as much as you do, so arrange annual inspections to be on the look out for serious issues that your tenants might not mention or your property agent might miss.
If you want to lear more about investing in property, read the following related articles:
1. Why property is a smart long-term investment?
2. How to choose the right investment property
3. Owner-Occupied vs Investment Property
4. Is a holiday home a good investment property?
5. Seven benefits of investing in property in your 20s