7 critical questions to ask before you buy a property

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Many people dream of owning at least one investment property as part of their retirement strategy. The appeal of buying houses is that they are seen to be more tangible and solid than shares on the stock market. However, I am sure each of us can recall meeting someone along the way who had been burned by property investment. This makes me wonder whether they fully considered their purchase before signing on the dotted line. The following are 7 critical questions everyone should ask themselves before buying their first investment property.

1. Why am I investing in property?

You need to decide the primary motivation for your purchase. Are you doing it because your friend has had success? Did you see someone on TV who had bought 10 houses before age 30? Or, do you want to build cash-flow to help you retire earlier? Having a clear goal in mind before you start will make reaching that goal much easier. Successful property investment takes a long time and you will generally be planning to hold on to the investment for, at the very least, 5 years.

2. How much can I borrow?

Every lender will assess your income differently, so there is never a single answer to this question. Your individual circumstances will be examined and these will fulfil some lenders’ criteria better than others. A professional mortgage broker experienced in investing will be able to help you and our team at Nieuvision are some of the best in the industry. Not many of us have a huge chunk of money sitting in savings accounts waiting to be used as a deposit on a house, but lots of people have access to equity in our own homes. It can be possible to extract this equity to use as a deposit which will also affect how much you can borrow.

3. What property do I buy?

Location, location, location! That is the real estate mantra. If you are looking for an investment property in Adelaide, draw up a list of preferred suburbs and see what is on the market in those areas. Investment property in Queensland? Do the same. Then decide who is your target renter will be. Families? Young professionals? Student housing? The type of house you buy will depend who you prefer to rent to. We advise talking to our property investment team – they can offer advice based on years of experience in the property investment field.

It is also important to have a clear understanding of just how much money you have available to commit each month to achieve your goals. Buying the wrong property for your circumstances can be a costly mistake.

4. How rentable is the property?

You’ve found what you think is the perfect investment property, and are ready to go ahead. The only thing is, you need to get $400 a week in rent to cover the mortgage. The real estate agent (who wants a sale) is telling you that it will be fine. But will it? You can use property portals such as www.domain.com.au and www.realestate.com.au to get a realistic idea of rents on comparable properties and ask an independent company to do a rental appraisal. Or you can get some professional advice and guidance from the property management team at Nieuvision to ensure the property’s rentability is as high as you need. They will research each property thoroughly and find you the perfect match for your needs.

5. Can I afford the property financially?

When it comes to an investment property, people can sometimes get caught up in the idea of owning the property without really understanding all the costs involved. Property ownership isn’t just about making payments on the mortgage every month. Each property can have numerous other costs that need to be considered: insurance, property taxes, estate agency fees, maintenance, rates and levies, even household utility bills during vacant periods. If this sounds like it will stretch your finances too far, consider a cheaper investment property, or rethink your investment timeframe.

6. Do I have the means to manage my rental property?

Owning a rental property is not for the faint hearted. They can be time consuming. If a shower head breaks, you’ll have to fix it. A leak in the retic? Go over and repair it, quickly please. Apart from dealing with issues such as finding and screening tenants, rent negotiations, repairs/property upkeep, you may also be confronted with more difficult issues such as tenants not paying rent, damages committed by unhappy tenants, and even tenant evictions. If you work full-time, or are running a business, these property management tasks may be daunting, to say the least.

We suggest finding a suitable property management team and take the pressure off you. For a small weekly fee they will handle everything for you – that is definitely worth it!

7. What is my next step?

There are many factors to consider before leaping into the property investment market. At Nieuvision we can take all of the pain out of it. Our skilled professionals will guide you every step of the way, all the way up to, and beyond, you signing on that dotted line when you buy your first property. We suggest that your first step is to contact us on 1300 832 554.

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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. Any mention of interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.

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