Searching for the right investment property can be a lengthy process.
And, by rights, it should be! It is a serious decision to be made, spending money on a property for the purpose of a return.
Not only do you need to think about your long-term wealth creation goals, but you need to make sure the investment property you buy will help you achieve these goals. In this article, we share six points pf consideration to help you recognize what to look for when buying your investment property.
Research the market There are several property markets across Australia, each performing a little differently based on a number of factors. Once you have a few markets in mind, do your research to understand how these markets have performed in recent years. You'll want to know about rental availability rates, vacancy rates and the types of rental properties available.
Calculate the cost Before you get a mortgage, you need to understand the different expenses you'll have throughout the time you hold the property. These expenses may include property management fees, Body Corporate fees if you are buying into a complex, maintenance costs & also potentially water charges for properties not individually metered. Make sure you balance these costs with what you expect to return through capital growth and your rental yield.
Location location location Once you've narrowed down the type of market that suits your level of return desired, you'll need to identify some specific locations of interest. Make sure you weigh up the proximity of properties to schools, public transport, retail, dining options and open spaces.
Rental yield Understanding the rental yield of properties is a critical part of your research. You can calculate the rental yield of a property by adding the income you expect from the property, dividing it by the sale price and then multiplying it by 100. If you'd like to get more detailed, you could speak to an industry professional to factor in your mortgage repayments, taxes and other expenses to calculate the true return.
Consider capital growth You also need to consider capital growth. Not only is it a large part of helping you build further wealth through property investment but buying a property with good capital growth can help you down the track when you sell or use the equity in your current property to expand your portfolio.
Levies and taxes Different areas have varying levies and taxes. You'll need to understand what the rates and land taxes are for different areas as this will impact on your rental yield.
Finding an investment property can be daunting, but by using the tips above along the way, it can help keep you on track amongst the viewings, conversations, auctions & inspections.
It means you can make sure your search is a methodical one and that you've done all of your due diligence before buying.
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