Avoiding the hype: 6 pragmatic tips for buying an investment property
When it comes to purchasing an investment property, you want to maximise the return on your investment and avoid being lured in by marketing gimmicks and media hype.
Here are six tips for becoming a savvy property investor…
- Get a good rental return
The first aspect you should check is whether the gross rental return is greater than 5%. As the rule of thumb, a property selling for $500,000 should rent for at least $500 per week. If the property is selling for $600,000, it should rent for $600 per week.
As you’re probably borrowing money to finance your investment property, a higher rental return will make it easier to meet your loan repayments.
2. Make sure it’s a long-term asset
As well as a healthy rental return, check to make sure it has capital growth.
Because of the high costs associated with buying an investment property (stamp duty, legal costs, mortgage costs, loan establishment fees, etc.) you probably want to hold onto your investment for at least 10 years. So make sure you get a building and pest inspection before purchasing the property so you don’t face any unexpected major capital costs in that time.
3. Get the right people to rent your property
When it comes to making a return on your investment, getting the right tenants can make all the difference. And professionals are usually the best tenants you can get. Generally they have a secure job that pays well, pay their rent on time and look after the property.
4. Choose a property in the right location
People who purchase property within 15km of the CBD tend to get very good returns for their investment, probably due to the lack of infrastructure. Tenants and homebuyers don’t want to travel an hour to their office, and so prefer properties closer to work.
5. Look for a low-maintenance property
Look for an investment property that has a low maintenance cost. Properties that have lifts or swimming pools in the complex can be very expensive to maintain. And you definitely don’t want a property that needs painting every 8 years.
6. Choose a property in a small apartment block rather than a large complex
Properties in smaller apartment complexes aren’t mass-marketed to investors, and generally have a high percentage of owner-occupiers. And that’s good for your investment because they generally look after the property and grounds, particularly if they’re retirees.
We guide clients in pragmatic approaches to investing so they can make wise decisions and not be distracted by the gloss and glamour of property developers’ pitches and marketing materials. You work hard to save money for your investments, and there are plenty of investment spruikers focused on selling you their product, rather than ensuring the investment is a right fit for your strategy.
For independent advice or more information about choosing an investment property drop Peter Quinn a line by submitting an online enquiry or calling on +61 2 9580 9166 and book your obligation-free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.