1. Have a clear goal
Understanding your objectives is key to finding the right investment property. The actual property itself is never the end goal when it comes to investment – it’s the financial element that you’re really concerned about.
2. Check your emotions at the door
This is not a home for you so there doesn’t need to be an emotional connection to it. It should always be about which property will give you the best return, not which one is most suited to your furniture. Be prepared to invest your money wherever the numbers make most sense… this could even be interstate.
3. What type of property should you purchase?
An investment needs to be a property that will be in hot demand from renters and possible owner-occupiers down the track. It’s best to do your research to see what types of properties are renting quickly and what properties are staying on the market for longer periods of time.
4. Old or new?
It’s the age-old debate: should you buy a renovator’s delight, or something you can rent straight away? It’s great if it can be rented out as is, but potential to renovate should also be considered. The ability to add value to the property is a good tick, as it will increase rental returns. Don’t immediately write off a property just because it needs a paint job or the kitchen cabinets need to be replaced. Alternatively, there are significant depreciation tax benefits to new properties.
5. Location, location, location
- How far it is to the CBD or business area?
- What is the proximity to schools?
- Are local shops within walking distance, or will tenants have to get in their car to pick up the essentials?
- Where are the public transport options?
- What other amenities are close by?
6. What can you actually afford?
Get pre-approval and make sure you have all extra costs available, including conveyancing, inspections and any taxes – and always ensure you have a financial buffer. You may not get tenants within the first month.
7. How to set up the purchase
When it comes to investing, it’s important to understand how to set up the purchase so it benefits you most. The entity should protect any existing assets and be tax effective. You can purchase in your name, through your super or through a trust, but always understand how the purchase will affect you and your family. Expert advice will assist in maximising the short and long term performance of your investment.
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 a lock-up garage.
Also look at properties that appeal to many segments. For example, a lift may appeal to both retirees and a young family, as both will be looking to avoid stairs. Just make sure the benefits outweigh any extra costs like higher body corporate fees.
9. Timing is key
You need to understand the market and the dynamics. While there are investment opportunities around most of the time, some market conditions are more favourable. If you don’t fully understand it all, ask for help.
10. Ask for expert advice
Your broker can put you in touch with the experts you need to talk to when it comes to real estate and investment. This means accountants, real estate agents, lawyers and valuers. These people are in the industry and they’ll be able to guide you in your decision making.