Here are our top tips for buying an investment property:
Choose the right property
Not all rental properties will be right for your investment strategy. Many investors prefer to buy properties with the potential to increase in value, so it’s important they buy at the right price in a good location with great amenities in the local area.
Other investors focus primarily on cash flow, preferring to buy homes that generate profits from the rental income they receive after all expenses have been paid. If this is your strategy, you’ll want to ensure you choose a property in a good location with strong rental demand and low vacancy rates.
Of course, there’s also the consideration of the type of property you want to add to your investment portfolio. Different types of property have the potential to generate vastly different returns in terms of rental income and capital growth, so understand whether you want to buy a unit or apartment, or an established house, or opt to build a brand new house-and-land package.
The key to choosing the right one is to work out the right investment strategy that will help you achieve your financial goals. When you have a strategy in place, you’re in a better position to choose the right property for your needs.
Understand the numbers
Cash flow is king. If you’re serious about investing in property, take the time to understand the numbers involved. Know what rental yield your property is achieving and what interest rate you’re paying on your investment mortgage.
Take the time to understand the tax deductions you can claim for being a landlord and know what your ongoing ownership costs are.
Engage a good property manager
A professional property manager will take care of managing your rental property on your behalf. Aside from ensuring your tenants pay their rent on time, your property manager will also strive to check the background information on any new tenants who apply to live in the home, increasing the odds of you getting a good tenant.
Your property manager will also conduct regular inspections to ensure your investment is being looked after and take care of any maintenance issues that arise.
Obtain the right financing
Discuss your finance options with a good mortgage broker. There are lots of different lending options available when it comes to financing your investment property, so ensure you get good advice about the right ones to suit your financial goals. Your individual circumstances will determine whether you choose a fixed or variable interest rate.
It’s also important to make sure that your loan is structured correctly. Understand the difference between interest-only mortgage payments and principal-and-interest payments, and know how they affect your investing strategy.
When you understand all the options available and how they could potentially impact your strategy, you’re in a stronger position to choose the right financing for your needs.
Know how investing impacts your income
Speak with your accountant about the correct ownership structure to suit your investment strategy. Your accountant can also show you how to accurately keep track of all the tax deductions available to you as a landlord so you can maximise your tax benefits overall.
While the tax advantages of owning an investment property are a great bonus, they should never be your primary reason for buying. You should also discuss how owning a rental property impacts your income in terms of cash flow.
Every investment has an inherent level of risk. Any good investor will take the time to understand ways to effectively manage their risks. Remember that interest rates can rise or fall, changing your cash flow figures. Tenants can move out, leaving your property vacant until your property manager finds a new tenant.
When you understand any potential risks of investing, you’re able to find effective ways to manage them so your strategy stays on track over the long term.
Nieuvision can assist with all the steps involved in purchasing the right investment property to suit your needs. Call us today on 1300 832 554. Or to book a seat at Nieuvision’s next FREE property investment info session click here.
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Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in our articles and newsletters. They contain general information only and have been prepared without taking into account your personal objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.