Purchasing an investment property, like purchasing your own home, is a huge financial decision. The considerations, however, are not the same as when it comes to purchasing your own home. When you purchase an investment property it is important to try and be more rational and logical about the decision. Here are some tips to help you make a good investment:
- Know what your long term plans are. Typically, people are investing in property for long term growth. This means that you really need to do your homework when it comes to both the type of house and the location. You need to know what areas have shown good growth and are predicted to perform well. You also need to consider if a house versus a unit is going to give you a better long term return.
- Know the numbers. It is vital that you understand all of the costs associated with owning an investment property. Rent is the source of income you will use to cover any costs but what if the property is vacant? You need to consider quite a few costs including the mortgage, property management fees, water and council rates, any strata fees, landlord and building insurance as well as any ongoing costs for maintenance and repairs.
- Find a good property manager: Many people consider managing a property themselves but in reality, this can be much harder than you think. Having a third party that is trained to manage your property has many benefits. They will ensure all rents are collected and will manage all aspects of your property on your behalf. They are trained to handle late rental payments, vacating inspections and other complex matters that may arise.
- Understand the area and what will appear to prospective tenants. Some important things to consider are distance to local schools, access to public transport and local shops. Also consider who your property will appeal to. If it is a small property then you might have a single person or couple whereas larger properties may appeal to families. Remember, you may need to think about whether or not you will allow pets and children.
- Speak to your accountant first. A good accountant will be able to advise you on negative gearing and how this all works. They will help you understand everything that you are allowed to deduct. If the property is new, they can also instruct you on depreciation. It is critical that you seek their advice up front.
- Make the property attractive to tenants. If the home needs a freshen up, don’t be afraid to paint. Also start putting some money aside for ongoing maintenance as over time, things will need attending to, just like your own home.
I hope you have found these tips useful. Owning an investment property can afford you the opportunity to reduce your tax and provide you with a long term investment that may provide you with an income in years to come but be sure you enter in to it with your eyes open. Get advice and understand what your costs will be. Being clear on these things will assist you in making an informed decision.