10 Tips for Investing in Property

Are you thinking of buying your first residential investment property? 

There are a few things to consider before making the move. Let’s take a look at the 10 most important tips for investing in a property. These tips are designed to help decide on buying your first residential property.

Here are our top 10 tips for avoiding potential difficulties and ensuring success.

1. Know your Financial Goals

Getting a deep understanding of your financial objectives is key to finding the right investment property. The actual property itself is rarely the end goal when it comes to investing – the financial elements should be your main focus. 

First, decide what your investment goal is, and then create a plan to achieve it within a realistic time frame. 

Are you looking for an income-generator to fund your children’s education? Building equity to gain a regular income? Or are you looking for a plan for retirement? 

The key is to define a plan and review it regularly as your situation and the market change.

2. Do your part: RESEARCH

Understanding which property is going to work best for your situation is key. It needs to be one that will be in high demand from renters. Do your part by researching which types of properties are in demand and which aren’t. 

Ask yourself these questions:

Is this an area popular with families who want three-or four-bedroom homes?

Is this area popular for singles and students looking for studio apartments?

What developments are planned nearby? 

Speak with property managers and check ads to find out what renters are currently looking for, and how their needs may change in the future.  You need to get to know the neighborhood you’re planning to invest in.

3. Considering 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 the potential to renovate should also be considered. 

The ability to easily and economically add value to a property is a plus, as it could increase rental returns. 

Don’t immediately write off a property just because it needs a paint job or the kitchen cabinets need replacing, but at the same time avoid over capitalising if it’s not going to deliver returns. 

It’s a balancing act, so consider your skill levels, the extent of makeover required, and your access to funds to pay for renovations.

4. Location to Consider

There are some of the things you need to consider including:

How far is the property from the business areas? 

Are there schools/hospitals nearby? How are the shopping and grocery stores?

Can tenants walk to local shops or will they need to drive? 

What and where are the public transport options?

What other amenities are close by? 

Are there cafes, a medical center, a pharmacy, a gym?

Location is critical to performance so checking the location should be one of your checklists.

5. Check your Finances

Always check your finances before deciding to purchase a property. Get pre-approval and make sure you can cover repayments as well as extra upfront costs such as conveyancing, inspections, and taxes. 

There are also ongoing costs to consider including strata, landlord insurance, property management fees, property maintenance, council rates, and utilities.

You need to set yourself a realistic picture of a property’s cash flow, rather than a vague idea of whether rent will cover expenses, so use a spreadsheet to calculate all foreseeable expenses. If cash flow is negative, ask yourself can you afford to maintain the property? 

What happens if it’s vacant for a couple of months? 

What you can do is to do your sums cautiously and always ensure you are looking into a financial buffer to avoid mortgage stress. 

6. Choose the Right Purchase conditions

Expert’s advice can assist in maximizing your benefits.

When it comes to investing, it’s important to understand how to set up the purchase to receive the most benefit. The entity should be tax-effective and protect any existing assets. 

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. 

7. Picking the right features

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.

You might as well 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.

These are just some things to consider and making sure the benefits outweigh any extra costs.

8. Your Emotional Connection Check

Remember, you won’t be living in this home, so there doesn’t need to be an emotional connection to the home or the area.

 Your decision should always be about which property will give you the best and high return, not which one is most suited to your own tastes and lifestyle.

9. Timing will always be the key

While there are investment opportunities available most of the time, some market conditions are more favorable. 

It’s a great idea to keep on top of the market’s movements and its dynamics. 

Do plenty of research and, if you don’t fully understand it, ask for professional help.

10. Get an expert advice

Your broker can put you in touch with experts when it comes to real estate and investment. This means accountants, financial advisers, real estate agents, lawyers, conveyancer, and valuers. 

These people are immersed in the industry and will be able to guide you in your decision-making.

Note: This is general advice only,please consult your financial adviser, broker, or accountant before acting on the information provided..