Investing in property, especially in Australia, is incredibly popular – and it’s easy to see why. Property, while undeniably an expensive investment, is an extremely safe asset with strong potential for capital growth.
Unlike the emotional journey of buying a home of your own, the decision to buy a property for the purpose of investment is much more strategic, complex and can often feel overwhelming. When done right, property investment is the gateway to financial freedom and flexibility.
We’ve pulled together a short guide to help you navigate the path towards buying your first investment property.
Step one – Understand your goals
Property investment is highly sought after as a form of passive income, however, it is often compared to running a business – for you must ensure the property remains profitable while providing a desirable product to your customers, the tenants. As such, it’s important to get it right from the beginning.
A good place to start it to think broadly about your reasons for investing and understand your short, medium and long-term goals. Perhaps the goal is short-term rental return, medium-term wealth creation or a long-term retirement strategy.
Once your goals are clearly defined, they will form the foundation for your investment strategy. Your goals will guide your thinking around time-frame, location, property type and the all important price point.
Step two -Sort your finances
The next, arguably most important step in property investment is sorting out your finances. Beyond understanding your borrowing capacity and home loan repayments, you need to consider ongoing expenses such as levies, rates, property repairs and maintenance and forecast profit and loss.
Chances are, you will most likely be relying on the income from the rental payments to support your mortgage repayments. It’s a good idea to be prepared for a potential shortfall between the rent and your repayments. In this scenario, you would need to be able to contribute additional funds to cover the mortgage repayments.
If you already own a home, you may be in a position to unlock existing equity which you can use to put towards your deposit. Home equity refers to the market value of your home minus the amount owing on your loan. Tapping into your home’s equity allows you to leverage the rising value of your home to borrow for an investment property.
Step three – Find the right property
When your goals are clearly articulated and your finances are in order, it’s time to select the right property. Once again, there is a lot to consider and this isn’t a decision to be taken lightly. The two main things to consider are location and property type.
It’s a good idea to invest in an area you know reasonably well, alternatively ensure that before buying, you do your research. When considering location, consider places that are desirable to live in to ensure your property is always in demand. Locations within close proximity to public transport, employment hubs and public amenities such as parks are likely to be more densely populated and therefore your property may be in higher demand. You can ask local agents for advice around things like rental yield and vacancy rates to better your knowledge.
Once you’ve chosen a location, the next step is to choose the property itself. This decision will be largely dependent on your budget. Beyond that, there are a number of things to consider such as property features and the condition it is in. It’s important to keep in mind, an older style property – while initially a cheaper investment, may cost you more in the long run due to repairs and maintenance. In terms of features, consider the importance of things like natural light or parking spaces in that particular location and ensure the number of bedrooms reflects the renter demographic in that area.
Ready to invest?
Are you ready to invest and need someone to help guide you through the process?
Talk to one of our Agents today.
