Investing in property is a smart choice for many Aussies looking for long-term profit potential. But before you dive in, there are a few things you should know.
Consider if you’re ready to buy, what kind of property is best and how to get a home loan.
Here’s a deeper look at each of these steps.
Preparing to buy
Purchasing and managing an investment property is no easy task. Not only can these investments be risky, due to rising interest rates or market volatility, but you’ll be responsible for maintenance and upkeep for years to come. You’ll also have tenants to manage and taxes to pay. Insurance costs will add up quick, not to mention legal and inspection costs.
Before you make the leap, make sure you understand the risks, and have a financial cushion should you need it. Have a disaster plan in place in case the worst happens and you can’t rent out the unit for a few months. Research the industry to make sure you know what rent you can charge for your area.
Preparing a plan that addresses each of these points is your first step to successful investing.
There are pros and cons to investing in houses and units. For instance, houses can bring in more rent, but upkeep may be more costly than apartments.
Location and features of the property should be your points of focus. Have housing prices been stable in the neighbourhood? Is it up-and-coming? An attractive location for renters?
Do your research on who your target audience is in each area and what features they care about most in a rental property. You want your investment property to be as attractive as possible in both location and amenities.
While fixer uppers can be profitable projects, when you’re just starting out with investment units, it may be wiser to take the less-riskier road and go for properties that already have appeal.
Financing your investment
When you’ve done your research and are ready to invest, it’s time to talk with our mortgage brokers about a home loan. When you find a property, we’ll help you calculate expenses and figure out what your profit could be. We’ll then figure out how much you can borrow and what your loan repayment plan will look like.
A term to know: negative gearing. This is when the profit from your investment property is less than all the expenses. Some investors accept this loss at first because they see potential for gains in the future, as the investment increases in value.
If this is a reality for you, be sure you’re investing elsewhere or have enough to cover costs while you’re not earning money on the property.
Investing in your first property is exciting, but it’s never easy. We can take the stress away. Talk to our team about your loan options.