It’s not always good luck or family money that gets them a start. Successful investors get to where they are through determination, the ability to take some level of risk and sheer hard work whilst learning the property market inside out and investing with the facts and not with their emotions.
Therefore, here are the key elements to analyse before purchasing an investment property
1. Setting The Budget
Suppose you are looking at an investment loan term of 20 or 25 years, depending on the size of the saved deposit. This maybe one of the most significant debts you will ever take on. Hence, it is crucial to prioritise any financial goals you might have before deciding on property investment.
Upfront costs
- Loan application fee
- Deposit (typically around 10 per cent to 20 per cent of the purchase price)
- Lender’s Mortgage Insurance ( if borrowing above 80%)
- Conveyancing and legal costs
- Mortgage registration charges, stamp duty
- Building, strata & pest inspection cost
Ongoing costs
- Council and water rates, building insurance
- Loan repayments and interest changes
- Property management fees
- Vacancy costs if you do not have tenants
- Maintenance and repair expenses
2. Thoughtful Research: Where To Buy And What To Buy
When you are doing your market research, things to review might include:
- Price growth potential in shortlisted suburbs
- Rental income stream
- Type of properties these suburbs are selling
- Average vacancy and rental return rates in these areas
- Accessibility to local amenities such as transport, shops and schools nearby
Bonus Tip
Rick Nieuwenhoven, Chief Executive Officer at the Nieuvision Group & Professionals Modbury, shares his two cents.
Someone does not know much about investments. What should they be thinking about? What are the two most important topics?
For me, the most important topics are Risk and Diversification.
So, what is the risk?
Risk is the appetite for you to invest your money in something comfortable, which will not create sleepless nights for you. The higher the risk, the higher the returns you can get and the higher the potential for losses.
So, if you cannot handle that stress, that means you are in the wrong classification for yourself. It suggests you might not operate your portfolio correctly. And, therefore, there is a high chance of inefficiencies.
The other part of this is Diversification
Diversification in your portfolio will mitigate risk. So, we don’t want all of our eggs in one basket.
We don’t want a portfolio just full of shares, especially one share. And we don’t want the portfolio full of property.
We want a diversified portfolio
When you come to retirement, this diversified portfolio will give you greater passive income streams. And also, greater security because it is going to be more balanced.
3. Potential Tax Deductions
You may claim a tax deduction on property-related expenses when it is available for rent or rented out.
Such expenses include but are not restricted to things like:
- Loan interest charges and set up costs
- Depreciation
- Advertising costs
- Building and landlord insurance
- Strata fees, land tax and council rates
- Bookkeeping and accounting fees
4. Review Your Credit Report Carefully
If you have got a utility account, mobile phone plan or credit card, there is presumably a credit reporting agency that has your file. Lending institutions can access this information about you to evaluate whether they should lend to you.
With that in mind, before looking for properties, make sure to check your credit history to avoid any issues with the loan approval.
5. Consult With Investment Property Specialist
Investment property consultants are well-informed about the market trends. Moreover, they are incentivised for every successful investment.
Do not entirely rely on your friends and family advice. Also, discuss your requirement with the investment property experts and make your decision based on concrete facts.
Get In Touch
If you are thinking about buying an investment property but not entirely sure where you should invest first.
Connect with our acknowledged property consultant over a no-obligation phone chat and make the right decision for your requirements.
Contact Us today for a Free Strategy Session!
