7 Tips to make sure you don’t buy the wrong investment property
It is a common question and one that the buyer’s agents at Property Pursuit answer quite a lot: How do I make sure I don’t buy the wrong property?
Here are some tips on avoiding a ‘lemon’ in the real estate investing market.
1. Finance: It is important to consider your financial situation. Start by getting your finance pre-approved, making sure you are aware of all the costs that are involved in buying and holding the property, and that you are comfortable with all the costs involved. It is also important to be realistic about how long you are planning on holding the property.
2. Location: There are 189 mainland suburbs in the Brisbane Local Government Area (LGA) so get ready to do a lot of research. We use our formulated Investment Matrix for the 58 Investment grade suburbs that identifies property type and price range. To do this yourself, you need to have a good look at each of those suburbs, determine what your budget will buy in each property type category (unit, townhouse, house) and narrow down what you can afford in each suburb. Then you can assess the investment qualities of the suburb (zoning, density, character, transport, demographics, schools, facilities, lifestyle) and create a shortlist of Investment Grade suburbs in your price range. Next check the suburb demographics against the property types to work out which type of property you should (or should not) buy in that location.
3. Inspections: Armed with your short list of suburbs, it is time to get your walking shoes on and inspect everything. Inspect properties that are below your budget, around your budget and above your budget. This helps you to get a good understanding of what properties are selling for which will be invaluable when it comes time to work out how much to pay for your preferred property. At the inspection, use an Inspection Checklist to make sure you’re looking at all aspects of the property. Remember: this is an investment so you use your head, not your heart when you are inspecting.
4. What to Pay: When you have found the ideal property for you and have completed a thorough inspection and investment assessment, the next step is to assess recent comparable propertiesthat have sold to arrive at a fair market price. This is an important part of the process and is not easily done, unless you have inspected a large number of properties in the immediate area, and are familiar with the superior and inferior aspects of each one in relation to the property you are interested in purchasing. Getting even a small detail wrong or not understanding subtle differences could lead to paying too much or continuously missing out on good properties because you are offering too little.
5. Under Contract: If your offer is accepted then the property is ‘under contract’, subject to your conditions. Now you have a lot of actions to coordinate. Time is of the essence now, which means that you must do everything within the agreed timeframes. Arrange building insurance, get your solicitor started on your searches, make sure your financier is working on finance approval, book and go to the building and pest inspection, and do any other tasks required under the contract. You may have some renegotiating to do after the building and pest inspection, or you may have to seek extensions if finance approval doesn’t come in on time.
6. Property Management: Heading towards settlement you will need to appoint a property manager who will now take care of your asset. They should take care of finding a tenant, regular inspections, payment of levies and insurance, collection of rent and disbursement to you, payment of invoices for repairs and maintenance and be in regular communication with you. To find out more about what is involved in Property Management chat to our property management team.
7. Protect your asset: Set up a maintenance schedule so that you can budget for ongoing costs and one-off expenses. That way you will be ready when funds are required.
All up, this process takes the average person around 200 hours over 4 months to complete. If that seems like a lot of time, that’s because it is, and it is vital. After all, you are investing a lot of money and you want to make sure that you are making the right decision. Alternatively, a buyer’s agent will be integral in giving you the best advice to guide you through the search, assessment, and purchase process. A great buyer’s agent will look at all aspects of the property and tell you about them – both positive and negative aspects including location, aspect, flooding, age, improvements, layout, potential, transport, neighbourhood and nearby facilities. And they will save you about 180 hours.
Independently verified information can save you making significant mistakes.
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To talk about your own plans for 2017, contact one of our passionate Property Pursuit Buyers’ Agents.