Piecing together the right investment property
Searching for the right investment property can be a lengthy process. Not only do you need to think about your long-term wealth goals, but you need to make sure the investment property you buy will help you achieve these goals. In this article, we share six tips to help you understand what to look for in an investment property.
Research the market
There are several property markets across Australia, each performing a little differently based on a number of factors. Once you have a few markets in mind, do your research to understand how these markets have performed in recent years. You’ll want to know about rental availability rates, vacancy rates and the types of rental properties available.
Calculate the cost
Before you get a mortgage, you need to understand the different expenses you’ll have throughout the time you hold the property. These expenses may include property management fees and maintenance costs. Make sure you balance these costs with what you expect to return through capital growth and your rental yield.
Location location location
Once you’ve narrowed down the markets that you’re interested in, you’ll need to identify some specific locations of interest. Entering a good market is great but securing a property in a top location within a great market is even better. Make sure you weigh up the proximity of properties to schools, public transport, retail, dining options and open spaces.
Rental yield
Understanding the rental yield of properties is a critical part of your research. You can calculate the rental yield of a property by adding the income you expect from the property, dividing it by the sale price and then multiplying it by 100. If you’d like to get more detailed, you could speak to an industry professional to factor in your mortgage repayments, taxes and other expenses to calculate the true return.
Consider capital growth
You also need to consider capital growth. Not only is it a large part of helping you build further wealth through property investment but buying a property with good capital growth can help you down the track when you sell or use the equity in your current property to expand your portfolio.
Levies and taxes
Different areas have varying levies and taxes. You’ll need to understand what the rates and land taxes are for different area as this will impact on your rental yield.
Piecing together the perfect investment property for yourself can be daunting, but by using the tips above, you can make sure your search is a methodical one and that you’ve done all of your due diligence before buying.
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.