What to consider when you’re buying an investment property
Keen to get into the property market as an investor? Before you start looking, you need to understand that what you’re looking for in a house, that you would occupy, might be different to an investment property.
When you’re hunting for an investment property, rather than looking for features specific to your needs; like commute times or how much you like the kitchen, you’re going to be thinking about the rental yield of the property and whether this would be an asset to your investment portfolio.
Understand your costs
There are additional costs that come with an investment property. Along with mortgage payments, interest rates, body corporate fees, council rates and other property upkeep costs, you may also have property management fees. Build a clear picture of your total outlay and ongoing costs before you assess the investment value of a property.
Do your homework
As well as your own research, it’s important to have building reports, valuations and appraisals carried out before you decide whether to purchase the property. Remember that the market valuation and the bank valuation might be slightly different. This is generally due to the fact that the bank, aka your mortgage provider, will be looking to minimise their risk.
In your research about the property, find out what’s planned for the area surrounding it. Make sure you know about any proposed developments or zoning changes, as these could have a significant impact on the property value. The local council is your first stop to find out what planning applications have been lodged.
Buying a ‘fixer-upper’
Be realistic about how much work the property might need. While you might be able to live among the chaos of a renovation as an owner-occupier, a renovation in a rental property could mean a significant loss of rental income and also a larger time commitment.
Consider a tenanted property
Don’t discount properties with existing tenants. A property that’s already happily tenanted can be a valuable option, as you won’t lose rental income while you look for tenants and you may save on property management fees.
Talk to us before you buy so that we can help you in your property investment.