More and more people are turning to property investment to secure their financial future. For first-timers, breaking into the property market can be daunting but by doing your homework you’re on your way to building an investment portfolio.
Having a strategic property plan that is within your budget is key, so starting small by buying a townhouse or single apartment for example may be the way to kickstart your investment.
The secret of success is to buy well. Here’s what to look for when considering real estate as an investment.
Where to buy
Location is integral to acquiring a good investment property.
Some of the best places to buy are those experiencing population growth, so look for emerging suburbs or regional areas that are desirable for renters.
Potential tenants look for properties that are close to work and where they have easy access to simple amenities such as shops, cafes and restaurants, parks and schools.
When searching for an investment property, aim to secure one that will be in continuous demand by tenants, as well as future home buyers, after all the investment is about wealth creation.
What to buy
Do you invest in a house or a villa? Both have the potential to work well.
But it’s important to select a rental that’s popular in the area. Allowing emotion to drive your decision-making is a detrimental mistake. Focus on what the market is demanding: this is a source of income, not the home you’re planning to live in.
Look for investment properties that have attractive features and wide appeal that will attract more than one segment of the rental market, such as singles, couples, young families or retirees.
Keeping costs down is another consideration, so opting for low maintenance properties is often the preferred route for many investors whowant to see a steady profit.
For those with a bigger budget and a willingness to tackle a fixer-upper, properties that need repair and upgrading but are in hot locations may be wise investments.
Potential to appreciate
While rental returns ensure that you have a steady income stream, making the holding of the asset more affordable, a smart investment is a rental property that appreciates in value.
How much will the property be worth when you sell it down the road?
When selecting an area avoid those that depend on a sole industry because if it falls, your property’s value may decline as well.
Costs of investing
Buying an investment property can be costly and will affect the overall return.
Some initial costs include stamp duty, conveyancing fees, legal costs, search fees and pest and building reports. Owners are also responsible for council and water rates, body corporate fees, building and landlord insurance, as well as budgeting for repairs/maintenance.
Remember that tenants come and go and it may take a while to rent out a vacated property.
Find a good property manager and let them to do their job. The good news is that management fees are tax deductible.