Buying a property for investment purposes is very different from buying your dream family home. Buying a property to rent out is a popular form of investment and many people find it hard to know what to look for. Buying an investment property is a long-term investment and should not be rushed into, so Property Pursuit has put together the following fundamentals to buying an investment property.
The benefits of buying an investment property:
- Property can be less volatile than shares or other investments
- You can earn rental income and benefit from capital growth (if it increases in value over time)
- If you take out a loan to purchase an investment property the interest on the loan is tax deductible
- You are investing in something you can see and touch
Things to consider when buying an investment property:
When buying your own home I’m sure you have a long list of requirements and ‘must-haves’. The same principles should apply when buying an investment property, however, the ‘must-haves’ should be different to take in into account the requirements of your prospective tenants.
First, look at the suburb; how far do renters want to be from the CBD, what demographic lives there and how are their households made up? Are they families, double income no kids, single professionals? Are the homes in close proximity to all amenities? These are all important factors in buying an investment property, as they will determine the probability that the house or unit will be consistently rented.
What are the important things to look for when buying an investment property?
- Make sure the numbers add up! Rental yield, body corporate fees, rates etc; it’s very important to work out your potential rental return
- Suburb and location (proximity to public transport, schools, shops etc) and whether this appeals to a wide range of tenants such as singles, couples, young families or retirees
- Layout and livability. Look for properties with features that will appeal to as many people as possible e.g. second bathroom or lock up garage
- Living and outdoor spaces (Queenslanders love to entertain outdoors)
- Potential to add value, i.e. capital growth
- Think about changes in the suburb that will affect future prices, such as planned developments or infrastructure changes which can affect the future value of a property
- Find out about the vacancy rates in the neighbourhood. As an investor you want your place tenanted. No tenant, no income and the property ends up costing a lot of money.
It’s also important to remember that just because you love a house it doesn’t mean that renters will. The trick is to find a happy medium between what you like in a property and the requirements of potential tenants. The fundamentals to buying an investment property will get you started in the research phase of buying but it is also important to talk to your financial advisor to determine if this sort of investment is right for you.