Investing in property is a significant financial decision and has produced substantial wealth for thousands of folks.
While rents can dip periodically, a good investment property will provide a steady revenue flow and increase in value over the medium to longer term.
Couple these two facets with the tax benefits that may be on offer, and you have a compelling case to grow your personal wealth through property investment and, at the same time, contribute to the vital service of supplying rental accommodation.
Like any investment, there’s always an element of risk, and so you should not go into such a venture without doing your homework and obtaining professional financial advice.
There are a few factors to consider to ensure your own financial security. Firstly, it’s a good idea to have a financial cushion for those times where your property may be empty and sometimes you’ll need a little more cash on hand for maintenance costs.
You must be comfortable with the role of being a landlord and the work that it entails.
As your agent, I’d be happy to guide you on the issues you might face and the questions to ask your financial adviser.
Here’s some tips to choosing an investment property:
- Aim for capital growth – This is the most common goal of property investment. Buy wisely, not emotionally. Do your homework on the neighborhood and the prices attained by properties similar to your selection in the previous six months. Research is widely available. Our agency will help you do that.
- Do the math – Never purchase on the sole basis that you’ll get a tax benefit. Instead, you must weigh up two fundamental equations: the price of the property and its likely capital gain over, say, a five and 10-year period; and the value of rent against your required loan repayments. Consult a professional financial adviser or accountant as they’ll have extensive experience in this area.
- Select your area carefully – You need to know the benefits of the immediate area to prospective tenants. Those close to city centers, schools, hospitals and shopping districts usually achieve higher rents.
- Decide on the type of property – Capital growth varies depending on what you buy. Houses perform best because they have land but are usually more expensive. Condos can be easier to maintain but will come with the overhead of strata costs that you’ll need to budget for.
- Consider the neighborhood rental market – If your property is near a university, then a house with a good number of bedrooms is going to be popular as a student share. Conversely, singles and couples will gather within urban centers or in beach suburbs, so one- and two-bedroom units move quickly. The key is to understand whether you’re buying a property that is suitable for rent in its neighborhood. I can provide you with some insights here.
- Check the fundamentals of your property – You don’t want to be replacing stove-tops, ovens and water heaters as soon as you’ve picked up the keys. So, try to pick a property that’s in good condition and appears easy to maintain. A building inspection may assist here. The cost of fixing any problems is a tax deduction against the rent received but when you first buy, you’re likely to have a lot of outgoings.
- Spend a little to attract tenants – In most cases, you’ll need a small amount of cash to re-paint to make the property presentable and fresh. You may consider replacing carpets, or flooring in the kitchen and even update the bathroom vanity. These improvements help find a tenant quickly. Remember, every week your property stands empty, you lose hundreds of dollars in rent. So, this is a solid investment.