Investment Property Buying Tips

The RBA has, for the 13^th consecutive month, maintained the interest rate of 1.5%.  In our previous blog, we explained the factors involved that help determine the rates, and it seems there has been little change.  For those paying off mortgages, this is great news and you should keep trying to get ahead.  In addition, the Aussie dollar streaked ahead to be $0.81 to the USD.

While you might not be flush with money, the opportunity to enter the property investment market could not be better, with low interest rates and the property market steady.  It’s interesting to note that property prices in Sydney and Melbourne have enjoyed a 10% growth over the past 12 months, and demand for properties for both purchase and rental remains high.

Here we provide 10 tips to help you when considering buying an investment property.

1. The Right Property

It may sound obvious but it’s surprising just how many people dive in without making sure that the property is well located, doesn’t require any major work, and has potential for long term rental. For example, a two-bedroom flat in the city is a good investment because the renter can sublet the other bedroom. A three-bedroom house near a university is attractive to students.

2. It’s a Rental

The investment property you buy is just that. Don’t look upon it as a place in which you would like to live. It’s a business decision. You are looking for a return on your investment.

3. Transport

A potential renter may place importance on easy access to public transport. If they have a car, fine, but access to the freeways or major roads will be a consideration. The location of your property is crucial if you want to attract good tenants.

4. Your Mortgage Broker

Use an expert in the financial aspects of buying an investment property. We know all the pitfalls and how to find the best deals that suit your circumstances. Life is made easier if you find the property then leave all the financial arrangements with a mortgage broker.

5. Fees and Expenses

You have to factor in a number of expenses when you are considering the costs associated with a rental. Legal fees, stamp duty, the repayments, maintenance required to get the property into rental shape. It’s easy to forget these expenses.

6. Property Agent

Do you really want to be collecting rent and managing the property and tenants? Consider hiring a professional letting agent who can take care of all these matters. They have systems in place that help them select suitable tenants and manage all other aspects of your investment. Just remember that there is a charge involved for a full management service.

7. Insurance

You will need proper insurances in place, which will probably be a requirement of the mortgage conditions. As your mortgage broker, we can advise you on the best way to insure your investment property.

8. The Legals

As a landlord, you have some specific legal obligations. In addition to your landlord’s insurance you must consider fire, safety and health issues. Electrical and gas checks should be done annually or at least with every change of tenant.

9. The ATO

There are taxes you have to pay on rental investment income and it’s a really good idea to consult with an accountant. There are also many deductions. Sale of the property will attract Capital Gains Tax as well. There are so many variables that, unless you are an accountant yourself, should be placed in the hands of a professional.

10. Long Term

Buying an investment property is not a ‘get rich quick’ scheme. There are quite a few upfront costs and you need to remember that property values tend to rise over time. A long-term plan means somewhere between 7 to 10 years.

The Wrap

Scott Partridge has the experience and knowledge to help guide you through the initial planning aspects of buying an investment property. It costs you nothing but your time and that time will be well spent to help you understand the positives and negatives involved in a large investment. It’s a big step to consider, don’t be shy to ask for a helping hand.