Five tips for buying an investment property
1. Plan and research your investment
Buying an investment property is a significant outlay, and making the time to plan and research is essential to achieving a good result. Start by creating a long-term plan with a clear and realistic vision of what you would like to achieve through your investment. This should include working out a budget and considering whether you want your investment to deliver a high rental yield or strong capital growth.
2. Location is king
Look for properties in established areas in areas no more than a 10- to 12-kilometre radius of the CBD that have a history of strong long-term capital growth. The location should offer good transport links, schools and recreational space. Avoid busy roads, property within earshot of train or tramlines and areas earmarked for significant development.
3. Seek scarcity and desirable features
A limited supply or unique feature will ensure strong rental demand and deliver healthy capital growth. Period styles such as art deco traditionally outperform newer properties. Desirable features such as balconies and car spaces can also add significant value to your investment.
4. Don’t over capitalise
Buying within the median price of an area and being smart about renovations will ensure the property will be both easy to rent out and sell when the time comes.
5. Enlist the help of experts: buyers’ advocate, financial planner, property manager
Enlisting the services of an expert at the vital stages of your purchase and the ongoing management of the property could pay dividends. Engaging an experienced buyers’ advocate takes the guesswork out of buying an investment property. A buyers’ advocate will help eliminate common purchasing mistakes, identify “investment-grade” properties and negotiate favourable terms on your behalf. Seek the advice of a financial planner to develop a framework around your assets and liabilities, select the best loan and use negative gearing as a tax offset. Invest in the right property manager. Property management can make or break your investment – the last thing you want is a rundown property or unhappy tenants. Look for a committed property manager who cares about your investment, ensures the property has reliable tenants and that provides regular rental statements so you can measure your return.
Cameron Deal is founder of Melbourne buyer advocate and property management agency Infolio. He will be hosting a free property seminar “Buy property like a professional” on March 26.