Tips for buying a worry-free investment property

A leading property investment group says most investors buy the wrong type of property, resulting in headaches and discouraging them from building a portfolio. Australian Tax Office statistics show 73 per cent of investors stop after one property[1] while the Australian Bureau of Statistics reports that 50 per cent sell their rental property within the first seven years[2].

Kevin Young CEO and founder of The Investors Club, which has helped more than 3300 investors on average incomes build multiple properties since 1994, says: “The most common setbacks for investors are a high cost of repairs and extended vacancies. Both are problems that stem from a bad property choice, costing you not just money but your confidence too.

“Good capital growth is essential. It’s important for investors to be savvy in their purchasing, looking outside their own areas and in markets across the country for areas forecast to have strong growth,” says Kevin.

“A good investment property will also attract quality tenants and deliver strong rental yields. To find the right property, investors need to have a business mind and look for features which would be attractive for a tenant, not for themselves. Buying on emotion is one of the biggest mistakes investors make.”

As CEO of The Investors Club, with over 40 years’ experience and more than 200 properties to his name, Kevin has the knowledge and experience for investors looking to beat the statistics and build a profitable property portfolio.

The Investors Club’s tips for buying a worry-free investment property:

1. Buy new: Old properties will cost you money in maintenance and have reduced tax benefits (in depreciation write downs), leaving your and the tenant to pay all the bills.

2. Buy a unit: Land is not tax deductible and gives no weekly tax savings yet is generally around 50 per cent of the purchase cost of a house. With a unit the land is usually around 30 per cent of purchase cost, leaving a massive 70 per cent of the cost tax deductible.

3. Preferably brick: Brick is durable and has fewer maintenance costs, not requiring regular painting or replacement.

4. Body corporates add value: Strata properties are able to maintain their value well. A large number of costs are covered by body corporates, including property insurance, garden maintenance, external paint and termite control. Hence Hence its appearance and value increase.

5. Buy close to the city centre: Inner-city properties are highly desirable and will have greater pressure on their capital and rental growth.

6. Choose quality building work: Make sure your property is quality checked by trained inspectors throughout construction. Poor workmanship can result in building problems and disgruntled tenants.

7. Don’t be a “postcode buyer”: Purchase property based on its scope for growth. Cities and regions across Australia all have different growth cycles. Being aware of them will give you more options.

8. Choose quality over price: A quality property in a popular area can deliver strong returns. Purchasing a cheaper property may seem like less of a risk at the time of purchase but can cause more problems and see less growth in the long term.

9. Understand the property cycle: Don’t be put off by slow growth. While property cycles have high, low and steady patches over a seven to 10 year period, Australian property values trend upwards over the long term. The tip is to diversify across cities.

10 Buy for the area’s demographic: Research the area to find which rentals are most in demand by its demographic. Units may see high demand in an inner-city area, while townhouses may be more desirable a little further out.

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About The Investors Club
The Investors Club helps investors on average incomes and above build property investment portfolios across Australia and New Zealand. Since it was established in 1994, The Investors Club has researched, sourced and sold nearly 17,000 properties to more than 9,700 investors. More than 3300 of these investors today hold property portfolios worth more than $1m in value. The Investors Club offers many services free to its investors, including sourcing tenants, research and building inspections. It also holds regular property education seminars and conferences throughout Australia. To find an event near you, visit www.tic.com.au/events.

Most education events are free, however media passes are available to those that are not.