April 29, 2020

Four considerations when buying an investment property

Buying a home and jumping into the property market is an exciting moment for anyone. With interest rates the lowest we’ve seen in decades, now is the time to really make your mark on the property market! From mapping out the desired neighbourhood to finding the home that fits your lifestyle; the only person(s) you need to satisfy is you, the buyer. But when you’re deliberating an investment purchase your considerations and strategies change, as your desired outcome and purpose of purchase contrasts that of your personal decisions.

We’ve recently compiled the top four considerations you need to allow for when purchasing an investment property.

1: Market Research

Usually, the first step when considering the purchase of an investment property is to decipher the right marketplace for your purchase. Our ever-evolving digital world allows us to facilitate our market research from the comfort of our couch. The addition to further research through virtual tours/home opens since the restrictions amid COVID-19, has enabled buyers further access to even more tools.

This initial stage is when strategy really comes into place, as you hunt for signs that suggest a strong and fruitful marketplace. The aim when researching the market is to determine an area which suggests good capital growth. Often a growing economy or the further expansion of infrastructure, are good signs of a thriving and expansive marketplace.

Initial market research should always be supported by professional advice given by a local real estate agent, to help decipher the hyper-local marketplace, including the trends they are experiencing at the time. This will be an integral part of researching, as the strategy around investment is to maximise return from your property.

 2: Costs – be aware of everything!

This is, believe it or not, a big one!! Obviously there’s the initial costings, such as the cost to purchase the home, plus the stamp duty, and the costs involved with establishing a loan (plus the annual fees that usually coincide), however, there’s also long standing costs that continue for the life of ownership of the investment. These include property maintenance costs, annual council rates, the cost of utilizing a professional property manager…. The list goes on!

Another point to make here too, is the annual growth of the property; you’ll want to compare the annual growth with the outgoing expenses, making sure you’re always ahead. This comparison, when carried out regularly, will help assess and confirm when an outlay in funds is worth the effort.

3: Location

‘Location, location, location’, a sentiment regularly (and repeatedly) used by anyone who ‘talks’ property, and one that is important to consider as the location of your investment property can really influence the long-term, projected growth.

A favourable location will encompass close proximity to local amenities such as schools, public transport and public facilities, etc. Ultimately, the more accessible these facilities are to future tenants, the broader audience you’ll be attracting once you’re ready to market your investment.

And although the initial strategy is not to sell, there may come a time when you need to and it will be then that you’ll be high-fiving your past-self, as the appeal of your investment property will be felt by a large buyer community, maximizing the sale potential.

4: Rental Return

This is sometimes where things can come undone! Remember to keep focused on the strategy and make decisions with the plan always at the forefront of your mind (inhibiting emotions and limiting their influence!).  Making emotional decisions can result in a potentially unattractive position, as they can push out the financial restraints and restrictions, causing an unbalance between rental income and outgoing expenses.

When considering rental returns, the major point to remember here is to always make sure that your rental income is more than your monthly expenses, whilst also maximizing capital growth to reflect above the market average.

How can we help you?

If you are considering an investment opportunity and would like some further clarity or information around your local marketplace, the experienced Eview Group agents can assist with local knowledge, market insight and professional advice to help guide you through the decision-making process and assist in your next move.