Thinking of investing in property but don’t know where to start? We turned to the experts for advice on everything you need to know to buy your first investment property and take your first step towards creating wealth through real estate.
Becoming a landlord is a big proposition and requires a strong commitment of time, money and energy on your part. But there’s a good reason why so many Australians — over 1 million of us at last count — invest in property, and that’s because real estate is a proven performer when it comes to creating long-term wealth.
If you’re considering taking the plunge, but you’re not quite sure where to start, these tips will help guide your purchasing decisions toward real estate.
Do your research
Finding a good deal all comes down to doing your homework, says buyer’s agent Frank Valentic from Advantage Property Consulting. “Do your due diligence and compare similar properties that have sold in the last three months in your chosen area,” he says. You can also read real estate and investment magazines, talk to experienced investors and investigate the investment prospects of the suburb you’re looking at, from demographics and tenant demand to past price growth and population growth trends.
Be guided by expert valuations
“To help with your research, you can buy reports from Residex, RP Data or Australian Property Monitor,” Valentic says. “These providers offer recent sales information to help you assess if the property you’re eyeing is a good deal.” You may be able to obtain some reports and data for free, while other more detailed reports will set you back around $50 each.
Know what you’re buying
Always organise a pre-purchase building and pest report. “If there are structural building issues and maintenance concerns, it may give you some leverage in getting the vendor to negotiate the price downwards,” Valentic adds. It’s vital that you know what you’re getting yourself into, so investing in a building and pest report is the best $500 you’ll ever spend. Keep in mind that if the property is an investment, that fee will be tax deductible.
The property market moves in cycles, which means it has highs, lows and stable patches. Finance brokers Mortgage Choice suggest that you “always ensure you’re comfortable with the possible pros and cons of property investing, and think hard about how they match your goals.”
Prepare ahead financially
Owning an investment property can eat into your disposable income, so be sure to prepare in advance for the financial commitment involved in owning one. “You will need to budget for things like interest rate rises and property agent fees,” Mortgage Choice advises, “as well as the usual ownership costs, and lost rent if you struggle to find or keep a tenant.”