While some investors may want to buy a property and rent it out straight away, others may choose to live in the home while they renovate it. Knowing what to do and not what to do is crucial to making a successful investment.
Investing in bricks and mortar can be a great way to create wealth, but there are some golden rules to consider before taking the plunge into property investment.
Before investing in property it’s vital to have a thorough understanding of your cash flow. Also, ask your bank for a pre-approval of your investment loan, so you know how much you’re able to borrow before you start hunting for properties.
Make sure you budget enough for rates, insurance and general repairs. And when you have purchased your ideal investment property do what you can to prevent costly maintenance issues arising, such as replace ageing taps.
Try to choose an investment property in an area where there is a strong demand for rental accommodation. Buying a property close to transport, universities and schools will make it more attractive to renters.
Are you looking for fast capital growth or wanting to hold the property long-term? During boom periods, it’s much easier to renovate properties and turn them over for a quick profit. In slower economic times, it may take many years to achieve the same growth.
While a home on a steep block may have a stunning view, it could be a nightmare to renovate due to retaining or excavation costs
Paying tradesmen to renovate your investment property is costly. If you’re prepared to get your hands dirty you can save money and increase your profit margin by doing the work yourself.
Remember a rental property only has to be clean and functional. Don’t get sucked into buying a property simply because it has a stylish interior.
When house hunting it’s very easy to get caught up in emotions. While a home on a steep block may have a stunning view, it could be a nightmare to renovate due to retaining or excavation costs. Be sure you weigh up the pros and cons.
If your repayments on the investment loan won’t be fully covered by the rent, your property will be negatively geared. While this can have tax advantages, it can also lead to financial stress if you don’t have enough cash flow to cover the loan repayments, rates or body corporate fees, so consider your budget carefully before buying.
It isn’t necessary to have your own home fully paid off before buying an investment property, however it is important to be comfortable with your current debt levels. Ideally you’d want to have a large portion of your own home paid off and other debts, such as credit cards, under control.
Before signing a purchase contract, take the time to understand the building report to avoid expensive repairs down the track. Termites are one potential problem to watch out for.
Everyone wants to be a property investor, but the reality is you need to be informed, crunch the numbers and stay calm before taking the leap.
Here are some key mistakes people make when investing in property for the first time:
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.