Buying your first investment property
Buying your first investment property is an exciting prospect. It’s also a serious investment decision and your choice of property and how well you prepare for entering the investment market can have major impacts on your future financial security – for better or worse.
To make sure the impact is for the better, here are some tips to you might want to consider.
Build a team
Surround yourself with experts you can turn to throughout your buying journey and beyond. These professionals might include a mortgage broker, accountant, solicitor or conveyancer, financial adviser and a buyer’s agent. Buyer’s agents can help with the selection of investment properties for maximum potential return and with the purchase negotiations which can be handy if you are new to buying property.
You should also consider whether you are going to personally manage your property or outsource it to a property manager you can trust to select your tenants, collect the rent and help you deal with any maintenance and tenant issues that arise.
Set a strict budget
Before you start searching for the ideal investment property, do your calculations and then do them again. As well as the deposit on the property you will need to cover stamp duty and a range of other costs such as bank and legal fees.
If you are looking at properties in the lower price range they may need work. Do you have the additional funds to make improvements and, if so, how much?
Other considerations include the rental return you will need to ensure you cover your ongoing costs such as property management fees, strata fees, council rates, landlord’s insurance and land tax.
Educate yourself thoroughly
Attend seminars, talk to experts and other property investors, and read up on everything from the best location for an investment property to the tax implications of owning one. Owning an investment property is akin to running your own part-time business – you really need to know what you are in for.
Keep emotion out of your purchase decisions
Buying an investment property is very different to buying your own home. Don’t buy something you fall in love with yourself unless it fits all the criteria for a good investment property purchase for you as well. Unless you have prior experience renovating a home, don’t fall into the trap of buying a charming fixer upper. It may have loads of potential for capital gains with some major improvements but do you have the time, money and ability to undertake them?
A safer bet may be a solidly built property in a good location that is below market price (simply because it has a bland street frontage or the current tenants or owners have left piles of mess around so it doesn’t show well to owner-occupiers) but can readily be improved cosmetically to attract a higher rental return and better quality tenants.
Learn about how to be a landlord
Study all you can about landlords’ and tenants’ rights. In most cases of trouble or disputes, you will be relying on your property manager to assist you. However, it’s advisable to know all the basics yourself as well.
Protect your investment
As well as comprehensive landlord’s insurance that includes building insurance it’s a wise move to consider loan protection insurance as well to ensure you can continue to cover your loan repayments (or any rental shortfall) should you suffer a serious illness or become involuntarily unemployed. Covering yourself is easy with an ALI Loan Protection Plan. Invest with confidence by talking with Osinski Finance about loan protection before you go ahead with buying your first investment property.