So you’re looking to purchase an investment property in the new financial year. Congratulations! For first time investors who may be already paying off one mortgage, it is important to fully understand the process and create some investment goals before taking the plunge.
Here are eight top tips to help you on your way to a glowing property portfolio:
DO YOUR RESEARCH
You wouldn’t buy a car without researching the market first, and the same is true for buying property. It is important to stay up to date with the latest market research, data and trends to ensure that you make an informed decision and put your money in the right place. Understanding auction results, suburb trends, clearance rates and vacancy rates will help you determine the best suburb for you to invest in.
ASK FOR HELP
If you are not a professional in the industry, it doesn’t matter how much research you do – you simply won’t know the ins and outs the same way an expert will. Get in touch with people like financial advisors and real estate agents and buyers agents who will help you on the right path to an educated decision. Educate yourself on tenants’ rights, negative gearing and other tax benefits.
USE THE TOOLS
It’s a wonderful era that we are in now – there’s technology to help you almost every step of the way! Gone are the days where you need to rush out every weekend for the printed property guide; online searches are updated in real time, and you can keep up to date with auction results and clearances rate from the palm of your hand! You can even check with our mortgage calculators so you can get a rough estimate of your borrowing capacity, and gauge how long it will take you to pay it off.
KNOW THE SUMS
Calculate how much you can afford to invest and determine your limit. Don’t rush into a purchase only to find that you will struggle to make the repayments. List all of your existing assets, income and expenses and speak to a mortgage broker to assess your borrowing capacity. It is a great idea to draw up a budget to increase your savings as soon as you are seriously thinking of investing – every dollar counts!
SHOP FOR YOUR TENANTS, NOT FOR YOU
You need to remind yourself that this property is an investment, not your home and as the landlord, you will be responsible for the upkeep of the home at your own expense. Try not to get caught up in minor details and finishes and instead focus on what is functional and easy to maintain. Look for properties with broad appeal: features like generously sized bedrooms, logical layout, working kitchen and bathroom(s). Also consider proximity to public transport and local shopping centres and supermarkets, as this will increase the desirability of your property.
FOLLOW THE CROWD
One way to increase your chances of securing tenants is to buy in a popular market. Look for suburbs where demand for rental properties is high, but vacancies are low. Suburbs where at least 30% of local residents are renters are a good place to start.
LEAVE YOUR EMOTIONS AT THE DOOR
Shopping for an investment property is like a business transaction. It is important to be thinking with your head, not your heart. Don’t fall in love with a property and allow your personal feelings to cloud your judgement. Stay cool, calm and collected in your search and only buy when you are comfortable that it is a sound investment choice.
CONCENTRATE OR DIVERSIFY?
Are you looking to build up a portfolio of properties? Give some consideration to how you are going to do so. Some buyers invest repeatedly in the same area that they know and trust, while others prefer to diversify that by investing in different suburbs or even different states. This option is not for everyone but it is worth considering when planning multiple investment properties.
There’s much to consider and it may be a long road ahead. Take your time and enjoy the process – and don’t forget to celebrate the wins along the way. Best of luck with your investment goals!