Investing in property is a very popular way for Australians to take control of their financial future. Creating a property portfolio is a great way to get ahead, and can really pay dividends provided your purchases are based on solid research and careful planning.
Here are just a few tips for purchasing an investment property:
Do your sums
Look before you leap. It’s all well and good to have a grand plan of the property mogul you’ll become, but if you don’t do your sums correctly your reign will be short-lived at best, and downright stressful or catastrophic at worst.
While property is often a long-term strategy, you’ll need to afford the repayments and associated costs in the short to medium-term. Consider the annual cost after factoring in tax, rates, interest and rental return, and break down to a weekly sum.
Once you establish the weekly amount you’ll be out of pocket, consider what this means to you. It might be the difference between living comfortably, and living with no fat to skin. While many people will happily give up their daily coffee in exchange for investment repayments, for others, this is a caffeine-free fate they’d rather not consider.
It’s important to lay all your cards on the table so you know exactly where you stand now financially, and how your new investment will affect your current lifestyle.
Understand the market and your investment area
If you’re hankering after an investment property in a certain area, it pays to do some research into the rental demand and sales data for that suburb. Talk to property agents, read data history on specialist websites and keep an eye on current sales in the area.
Consider the demographic of residents in the area, and what changes the local council has in store in terms of infrastructure and improvements. Is there a government school with high demand for enrolment? These kinds of things can really impact property prices and rental demand.
Be flexible and reap the rewards
If you feel like you might be priced out of your desired area, consider adjusting your mindset and buying in the next suburb out. Often when a suburb or region is experiencing fast growth and rapid gentrification, there is a more affordable option just around the corner. This means you can look forward to future growth, instead of buying at the peak of a boom.
Investigate the best financial approach
Talk to a qualified financial planner to discuss the tax ramifications of plunging into an investment property. You’ll also want to weigh up the advantages of using equity from your principal residence, what size deposit you will need and the cost of legal conveyance services.
Financial experts, accountants and property managers are essential people to consult when you’re considering a property investment. They deal with investments every single day, and are well versed in what works and what doesn’t.
Research, research and more research is what successful investors have in common with each other, but it’s important to trust your gut also. Provided you can combine an astute blend of your own instinct and well-founded research, you too can secure your financial future and start a high performing portfolio.