Real Estate

Things to consider when buying an investment property

Things to consider when buying an investment property

Making the move from owner-occupier to property investor is a major one with different issues to consider in the investment game to that of the owner-occupier one.

Read on to find out more.

To become a property investor - or not?

There are plenty of great reasons to buy an investment property.

Think vacancy rates around 1% or lower and annual median rental spikes of between 4%-13%, according to CoreLogic data.

And that's not all!

December 2022 alone saw rents rising across Australia's combined capitals at their fastest ever annual pace while the number of vacant rental properties was at an all-time low, and annual rental listings are also down 38%.

So, while tenants are enduring an extremely tough time, these same points have created a fantastic landlord market.

And Australia needs the Landlord World to grow.

Yet, whether you're preparing to be a first-time landlord or you entered the Landlord World years ago, there are some important points to remember when purchasing an investment - especially as this purchase won't be the same as that of an owner-occupier home.

Let's take a look at the top tips to contemplate when becoming a landlord.

Know your investment goals before buying

Will this property investment be your one and only, to have and to hold long term from this day forth for its retirement nest egg opportunities?

Or, will this be a set-and-forget investment and one of many purchased across your life, including your own property?

Either way, you need to consider exactly what, when and how you wish to achieve your investment goals before buying.

Things to consider when buying an investment property
Unlike your own home that you live in, an investment property is solely a financial decision and all you want from it is future growth potential. 

Thoroughly understand the investment climate and its trends and forecasts

This applies especially to first-time investors and it's especially important during periods such as the current one.

But you also need to understand investment climates from before COVID as well as what the top-notch experts are predicting and what they can advise about investment overall.

Buy with your head, not your heart

Sentimental property investors rarely succeed in the Landlord World - and there's good reason for this.

Unlike your own home that you live in, an investment property is solely a financial decision and all you want from it is future growth potential.

Also, you won't be living in this home - someone else will.

Research the location

This future growth potential comes in large part from a home's location and its nearby infrastructure and amenities.

So, research your potential investment neighbourhood and investigate recent development applications, both residential and commercial.

What are properties in this location selling for, and why?

And are rental returns and vacancy rates promising in this area?

Don't underestimate ongoing costs

First-time investors can often be caught out by ongoing property costs.

This is why an intricate budget before buying is essential as you will need to set aside cash for council rates, insurance, and possible body corporate fees.

You'll also need to consider property management costs.

As well, even the most stylish house will need to undergo general updates such as fresh paint and carpet every 10 years or so.

Above all, don't forget potential emergency repairs and maintenance issues.

Assess tax implications including negative gearing

Investment tax savings are a big reason why people choose to become landlords.

Negative gearing - when a property's expenses outweigh the owner's investment income - often holds a major position in such tax implications.

But it may or may not work for you so again, it's worth checking on these details before buying.

Appraise your current debts, especially mortgages

Talking finances, you should also double-check your current debts before buying an investment property.

If you're still paying off your owner-occupier property or other investment homes, it's best to have a major portion of such mortgages repaid before buying again.

The same goes for personal loans including credit cards.

Find a smart property manager

Property management fees are often the largest investment expense after loan repayments, so it's crucial to get this point right.

Saying that, you can be your own property manager as it's not set in legal stone that you have to have one.

However, if you do decide to employ one, bear in mind that there's more to a smart property manager than just collecting rental fees for you - and chasing up tenants if these fees aren't paid.

As well as knowing tenancy and rental laws back to front, property managers should find you the best possible tenants and assist you with maintenance issues, paperwork, and records.

Interstate or overseas investors in particular need to fully trust that their property manager will undergo regular inspections of your property, including taking photos of it.

It's a good idea to obtain property management recommendations from friends and family or to check with agents in your area.

Either way, ensure you regularly check up on your manager, especially in the first days of being a landlord.

We're here to help

Whether you want to take the investment home loan road or the buying or selling one, we’d love to help you on your new journey!

We can find you the best home loans from more than 40 of Australia’s biggest banks and specialist lenders and we can also help you refinance your loan to help you keep more money in your pocket.

So, give us a call today at Lending Loop.

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