When you are in a position to purchase an investment property, you must ensure that you make good decisions on a number of important matters.
Some of the important factors to consider are:
Seek pre-approval of finance – This saves time when you do find a property that takes your interest. You also need an idea on how much you can spend on purchasing your investment property.
Take the time to make a wise selection of areas to purchase in – You should ensure that the area is in good proximity to shops, transport, schools and employment. These four factors will attract a broad range of tenants who are looking for medium to long-term accommodation.
Consider the purchasing entity you should buy in – Are you investing for your retirement? We can offer advice and assistance on the best investment vehicle to be used. There is not a “one size fits all” approach. Buying in your name for a tax break, your spouse’s name for asset protection, your Self Managed Super Fund or Trust for longer term investments are all important factors. Your accountant is an important adviser early in this process.
Be careful who you seek your advice from – Chatting about investing at a social barbecue can be interesting, however it can also be dangerous if you adopt unqualified advice. Friends and family may have had success in investing, however always remember everyone’s circumstances are different. The formula in which you buy your property should be specific to you.
Know your dollar limit – Having obtained pre-approval of finance, you will be well-placed to hone in on properties in your price bracket, without wasting time on properties outside those parameters.
Have your deposit ready – Ensure that you have a 10% deposit ready. At times, Vendor’s will accept a 5% deposit, but this isn’t guaranteed. If the full deposit required is not available to you, speak with your Lender about a Deposit Bond. Contracts usually have a provision to accept Deposit Bonds.
Carry out Pest & Building Inspections – It is extremely important to carry out your due diligence. We like you to ensure that you have made Investigations prior to exchange (where possible) and have satisfied yourself that the condition of the property is acceptable to you. Gaining information on the state of repair of the property at the beginning will be useful for maintenance and will alert you to any issues that require immediate attention, which the Vendor may be prepared to do.
Look at the long term benefits – Take into account not only rental income, but capital growth. As mentioned above, being in proximity to schools, shops, transport and employment will be attractive to a greater number of tenants and investment purchasers when you are ready to sell. What is also important is selecting a low maintenance property – i.e. one that you will not have to spend large amounts of money on maintenance, repainting, replacing piers or roof etc.
Insure yourself – Seek advice from your Financial and Insurance Advisers regarding insurance that is appropriate to your circumstances. It would be disastrous if you had to sell your property urgently due to your inability to maintain mortgage repayments during a lengthy vacant period.
Choose a good Property Manager – A “set-and-forget” approach won’t always look after your investment. Ensure your Property Manager is pro-active, maintains good communication with you and your tenants and regular inspections are carried out and reported to you. What we must remember is a Property Manager’s job is to manage tenancies, a property owner’s job is to maintain the property. Every now and again injecting some capital into the property for maintenance and appeal will ensure that you attract quality tenants, and will also attract a quick sale when your investment has done its job for you.