Investing in property is a fantastic way to increase your wealth and secure your financial future, however, this doesn’t just happen over night. There are various components that can affect your success in the market. Here we run through the dos and don’ts of investing in property.
Before you do anything, be clear about your goals and what you hope to achieve through your investment.
Talk to your financial advisor and accountant to get your personal finances in order before jumping into real estate. Don’t be afraid to spend time planning your investments because the more time you spend here, the better your returns will be in the future.
Ask questions to understand the market and the dynamics of where you are buying:
What is the vacancy rate of the area?
What are the infrastructure plans for the future?
What is the competition?
What are the trends?
Does this property match your personal risk profile?
What financing arrangements can you access for this property?
Where can you borrow the money – through your self-owned superannuation fund or the bank and what interest rate are you going to pay?
Will you be able to support my mortgage if you lose your job?
Is the property at market value?
Is there a rent guarantee? Properties that have rent guarantees usually have inflated selling prices. This means you might not be able to cover the gap in payments after the rent guarantee arrangement expires.
What is the age of the property and what condition is it in? Make sure you consider all the ongoing maintenance costs, rates, land tax, etc.
What are the title arrangements?
Is the area attractive to tenants? Properties located in close proximity to shops or transport generally have lower vacancy rates and higher rents. The ideal tenant is stable – renting to professionals in full time jobs with a good credit history and decent salary is the best way to ensure a continuous and hassle free income stream.
Do your research – it’s a good idea to buy a report on recent sold prices in the area you’re looking to invest in. APM Price Finder, Property Value and Property Data are all good, credible websites to use. Also talk to your local real estate agent to get more information.
Conduct a building and pest inspection as terminates are prevalent in many houses today.
Hire a building surveyor to view the potential property if you plan to subdivide in the future.
Find a good property manager.
Take a long-term view and manage your risks. An investment property should be seen as a stepping-stone to purchasing a portfolio of properties that will fund your retirement.
Invest for tax reasons alone. Although strategies like negative gearing are incentives to invest in property, circumstances such as interest rates, rent rates, your personal situation and the value of the house can change and leave you out of pocket.
Become personally invested in your property purchases. Being an unemotional buyer will work in your favour because you’ll learn how to buy property widely, even in states you don’t live in. This means you can access differing growth levels and improve your safety in the market.
Buy an older property that can drain your finances through maintenance costs.
Buy in an area where there is an oversupply of properties. Rents will be low and capital growth will be limited.
Take advice from friends and family who are not experienced property investors with a good track record.
Over-borrow – when interest rates are low it’s easy to fall into the trap of over-borrowing. Property is a long-term investment, so likely you will experience a range of interest rate scenarios over time.
Believe property spruikers that are selling for developers and also don’t buy into property seminars telling you that you can be a multi-millionaire overnight.
Rush into a deal that seems too good to be true. Remember that cheaper isn’t always better!
Managing Director Stephen Aitken began trading as Aitken Real Estate in 1989. Independently owned, the strong emphasis of company culture dedicated to excellent results and total client care have ensured Aitken Real Estate is the dominant private sale specialist for the local area encompassing Cheltenham, Mentone, Parkdale, Beaumaris and Dingley.