Buying an investment property continues to one of the smartest areas to invest your money. An investment property should be about increasing your wealth and securing your financial future. However, you need to keep in mind how effectively you are with managing your investment, which will determine whether or not the investment helps you reach your financial goals. The cost of owning an investment property can be surprisingly low after you take into account your rental income and tax deductions you’ll be entitled too. Check out Fortitudo’s tips for helping you bag a feasible investment…
1. Choosing the right property at the right price
Investing in property is usually about capital gain, so choosing the right property is vital. It is about choosing the property that is most likely going to increase in value and is appealing to rent out. The key is to do your research, work out what everything is selling for in and around the area and then you’ll discover that you will be very good at working out what the property might be worth.
Lenders and mortgage insurers have valuable data on different locations and property developments. This information can easily be accessed to assist you to avoid picking the wrong investment property. Ensuring you have a steady rental income stream is also vital because this cash flow will see you through the holding of the asset, providing an income and become a safety net of cash if anything needs maintaining within the property.
There are many different types of property you can buy, which all have their pros and cons, These are worth overlooking potential investments. It’s important to note that your property needs to suits the demographics of the chosen area you intend to invest in.
• Some apartment units have a very low maintenance cost, but can be slightly higher than the generic home.
• Houses are more expensive to maintain but can be offered to students and families, depending on the client you wish to cater to.
• Land can provide no rental income but may appreciate more quickly if purchased in an area with limited supply.
2. Do your sums – Cash flow is always king
Investing in a property should be considered a medium to long-term investment, so you need to make sure you can afford to maintain your mortgage repayments over the long term. Once you own your investment property it can become quite inexpensive to keep, this is down to the tax reduction on many of the expenses and the rent that is earned. It is also important to note that rents tend to increase over time, leading to higher income. Don’t forget to take taxes into consideration when doing your calculations. These can change all the time, Stamp Duty, Capital Gains Tax, and Land Tax all need to be taken into consideration.
3. Finding a good property manager and let them take control
A property manager is usually a licensed estate agent and a professional in their field. They can give you ongoing advice, manage your tenants, maintain any issues, review rents, find you the right tenant from checking and referencing. Some estate agents offer this at a small percentage of a deduction of your rental price.
4. Understand the market and its dynamics
If you’re investing your hard earned cash into something, you need to know everything about it. Treat the list below as a starting point of considerations before investing.
• Do your research on other properties in the area.
• Speak to as many locals as possible.
• Visit local estate agents.
• Always consult professionals to do things you’re not sure on.
• Research independent information for online; average rents, property values, demographics and suburb reports.
5. Make the property attractive for renters
Always keep to neutral tones and keep the kitchen and bathroom both modern and in good condition. This will always attract better quality tenants, and also gives them the opportunity to make it their own. Remember this is not your home, it is simply an investment, therefore do not risk getting too involved into what it looks like.
6. Use the equity of another property
Leveraging equity from your personal loan or another property investment can be a great way to purchase your investment. It also displays to mortgage lenders that you are a good candidate to lend too, considering previous payments haven’t been missed.
7. Always look at the long-term goal
Remember to always look at the bigger picture, property prices do not always rise straight, having patience is vital in any investment. The longer you can afford to commit to a property, the better the investment will be for you.
At Fortitudo we have many different new builds that are available to buy off-plan, which will be a good investment for first-time buyers or buy to let investors. For more information please visit our website.