Our Top 5 Tips for Buying an Investment Property
Where do you go for advice when making big decisions – like buying property? You might ask mum and dad, or rely heavily on information from selling agents.
These sources can be useful, but not all parents are savvy property investors, and agents represent the seller’s interests – so it’s always important to do your own homework!
Read on for our 5 top tips for buying an investment property to help you get started…
So you’re considering buying an investment property – what next?
The whole point of any investment is profit. We want to help you find a property that will grow in value, not lose you money.
While it’s impossible to accurately predict the property market – so many variables impact property prices – understanding some basic principles can reduce risk and improve your odds!
1. Consider your goals
To find a profitable rental property that suits your needs, we recommend you consider:
● your personal situation/goals
● market information from independent, credible sources and
● what will appeal to both tenants and buyers.
Ask yourself:
- Do I want to live here eventually, or is this purely an investment?
- When am I likely to sell?
- Do I need the property to be:
a) negatively geared (loss-making) to reduce tax or
b) positively geared (profitable) to maximize income?
This allows you to look for properties that suit your goals.
2. Ponder profitability
Profitability in property investment comes from two areas – rental yield (rent minus costs as a percentage of total property value) and capital gain (selling for more than you paid).
Consider whether income or long-term capital gain is more important for you. That may determine whether you buy a unit, a house or a villa/townhouse/duplex.
New units will generally earn higher rent and offer higher tax deductions, but have low capital gains.
Houses often earn less rent, as a percentage of property value, but have higher capital growth, due to land values rising and redevelopment potential.
A strata villa may be ‘middling’ on both rental yield and growth.
3. What area will you buy in?
Once your priorities are clear, choose an area. Consider popular localities you can easily visit to get a feel for the area.
Look at industry research on market trends.
Decide what you need or what will make it attractive to renters; close to schools, public transport, shops, parks, etc.
Ask local property managers how long properties take to rent.
4. Refine your search method
Now you are ready to start your search:
- Use leading industry websites like realestate.com.au and reiwa.com.au
- Call local agents and ask them to let you know about suitable listings coming up.
- If you are time poor or want to bring in an expert, you may consider using a buyer’s agent.
5. Pick the right property
Estimate costs, probable rental income, and capital gain potential.
Financials
To estimate financials consider your:
● funding/borrowing capacity (for investment property loans advice, ask a lender/mortgage broker)
● tax implications incl. capital gains tax (ask your accountant)
Specifics for the target property:
● outgoings (rates, strata fees, insurance, loan repayments)
● likely repair and maintenance costs (ask a local rental manager – key for managing cash flow)
● rental income (ask a local property management agency, check ads for similar rentals).
Rentability
To identify the most rentable property types in any area, ask a local property manager.
Look for properties with popular:
● features (number of bedrooms/bathrooms/carparks)
● style/finish (e.g. timber floors, European appliances)
● ‘walkability’ to schools, parks, shops, cafes – see sites like www.walkscore.com.
Capital Gains
Strong gains in capital growth are never guaranteed, but targeting properties where positives
like these apply, can help:
● potential for improvement (subdivision/redevelopment potential)
● planned improvements in the area (zoning, transport, schools)
● strong demand (ask local agents / check REIWA average selling days and property values).
Set yourself up for future success with We Love Rentals
Our expert staff at We Love Rentals can advise on what to look for, whether a property will be lettable as-is, maintenance costs to expect, and achievable rent.
Let us help you to focus on what really matters!
Call us today on 6254 6300 and start making your future prosperity a reality!
Brendan Leahy
I am the licensee of We Love Rentals and provide support to the team whenever needed. I began my real estate career over two decades years ago. While I loved seeing people achieve their dream of a new home for their family, I kept thinking that there had to be a better way of doing real estate – one with respect for the long term benefit of the client and one that focuses on customer satisfaction.
