Factors to Consider Before Investing

Property remains a popular investment option for many Australians. The relative ease with which seasoned experts and novices alike can jump in, combined with lucrative capital gains and tax incentives, makes it an attractive, low risk way to invest.

While it is true that little experience is required to get started, there are definitely factors to consider before you choose the best investment. These considerations revolve around the investment location, property type, investing goals and timing.

What should you consider when buying an investment property?

An investment property needs to provide a return, eventually. Whether you’re planning for long-term profits or an immediate return on investment, diligent research and planning will be necessary before buying an investment property.

Location

Choosing the right property location is essential. Buying in an area you are already familiar with and understanding recent sale prices can be a good idea, so you know what you can expect to pay for an investment property. Finding a property location where growth is predicted is a good opportunity for capital gains.

Rental yield

Consider the rental yield, rather than a high rental income. The best property investment will have a high rental income in comparison to the property value – this is the rental yield.

Vacancy rates

Vacancy rates can indicate where there is demand or can reveal undesirable areas. Find a property location where vacancy rates are low, to give your investment property the best chance to be in high demand – where you have high demand, you can choose the best tenants.

Proposed planning

New developments and infrastructure can affect the value of your investment property. For example, an extended train line could be an attractive development and increase the value of your property. Consider how the timing of these developments fits in with your investment property goals.

Property features

A property with attractive features such as a lock-up garage, second bathroom, multiple bedrooms, and in walking distance to shops, transport and restaurants is a good property investment. Make sure the features you look for mirror what your target market will require.

For example, if your property is close to the CBD, your target market is likely a single professional or professional couple. This target market isn’t likely to require multiple bedrooms or bathrooms, but a balcony or parking may be sought after.

Cater to different groups

Create demand for your property by appealing to a wide range of family groups including singles, couples, families and retirees. Choose a property type that can accommodate these different groups.

Property type

Are you looking for a unit or a house? Each property type comes with its own challenges and advantages. Work out which property type will make the best investment property according to your goals. The upfront costs of a unit are less so you can invest sooner, while a house may provide greater capital gains in the long run.

Maintenance

An older property, along with properties that have a pool or big gardens, may require more maintenance than a new property without a pool and a small garden. Be sure to consider these varying maintenance costs when investing in property.

Additional Costs

There are countless additional costs that need to be considered when buying an investment property. These include purchase costs like stamp duty, conveyancing and legal fees, building inspections, as well as ongoing property costs like management fees, insurance, strata fees and council rates.

Goals

What are your property investment goals? Are you looking to turn a profit when you sell, or would you prefer your investment property to generate an ongoing income? Clear goals will determine your investment strategy and help you choose the right loan to suit.

Tax deductions

The costs involved with investing in property may be tax deductible. Tax-deductible expenses may include real estate management fees, advertising costs, insurance, council and water rates and even the interest on the loan used to buy your investment. Tax deductions are helpful to consider when deciding if investing in property is the right choice for you.

How do I make the first move?

The first step to investing involves a review of your finances. Work out what you can afford, and this will inform where you can reasonably expect to purchase an investment property and the property type.

Chat with a lender who can advise the loans that will suit different investment strategies, including how you may be able to use your equity to buy an investment property. With an idea of what you can afford and even a pre-approval, you can start researching where the best investment will be.

When is the right time to invest?

The right time to invest is when you can afford to invest. It’s always better to get into the market sooner, rather than later. Trying to predict market conditions and buy when the market is favourable isn’t advisable as it will probably never be perfect.

Provided you choose a sound investment property it’s always a good time to invest if you have the means to do so. Keep in mind that an investment property is a long-term investment and market conditions will always change. Knowing when to sell an investment property is probably a more pertinent question, as this can determine the return on your property investment.

Who can help me work through my concerns?

You may have a number of concerns before investing in property, particularly if you already have a mortgage on one property. Increasing your repayments and managing two properties can be daunting.

At Mortgage House we offer more than home loans. We’re here to assist you with a financial product that suits your investment strategy. We offer a range of home loans tailored specifically for investors. Discuss your concerns and we can help you find solutions, whether it’s your first investment property or you’re adding to an existing property portfolio.

What if it all falls through?

If you’ve made an offer on an investment property, but the sale falls through, don’t lose hope. When it comes to finding an investment property, emotions should be left at the door. Without the emotional pitfalls of finding your ‘forever’ home, it should be easy to start again.

Finding the best investment is about checking boxes and ensuring a sound investment. It is better to wait for the right property type than to rush in for something that will not provide a healthy return.

Are you thinking of investing in property?

As the saying goes, ‘there’s no time like the present’, and that is particularly true of property investing. The sooner you start investing, the closer you are to substantial capital gains and generating an income.

At Mortgage House, we are no stranger to the homeowner’s journey. It’s a long (but rewarding) one. Speak with a lending officer to find out if you’re in a position to embark on an exciting and rewarding property investment venture – just contact us via our contact form or on 133 144.