Property investors looking to expand their portfolios should be thinking about value for money, the quality of the property and playing the long-game.
8 June 2016
Buying an investment property is a big deal and any purchase decision shouldn’t be taken lightly. So, here are our top three tips on what to look for when making that all important investment purchase.
Focus on the return
Before you buy an investment property, think about everything that could affect your return - both at the end of each year, but also when you sell it down the track. You obviously want to buy a property that appreciates over time, but more importantly – ensure it doesn’t put strain on your cash flow month-to-month.
Getting this right will come down to the price you pay for the property, the rental income it can generate, any added costs such as body corporate fees or landlord insurance, and then any tax incentives like negative gearing.
Don’t make concessions on the quality of the building
Knowing the property is in good condition is not only important for making the building look good for when you rent it out – it also means you’ll pay less in maintenance over the years.
Outside of repayments, maintenance is one of the biggest costs for a landlord – so if you need to replace the roof, or re-plaster the walls in the first few years – it can set you back. It’s important there are very few surprises in the first couple of years of managing an investment property, so do all the required checks to limit the surprises.
Any investment in property is a long-term commitment, so don’t buy assuming you’ll make quick capital gains in just a couple of months or years. The market can fluctuate, and often runs in cycles – so when you buy think a long-term strategy.
The long-term approach has a number of benefits. It gives the investor time to study the market and sell at a time that suits them – it also removes the short-term pressures of buying and selling in a short space of time.
It can also be lower risk, allowing the owner more time to make the most of tax incentives and means a property manager can be appointed to ensure the investment is as hands-off as possible for the owner.