7 investment property tips for a more secure future
Property investment is still one of the most popular ways for Australians to invest and plan for their future. While that may seem surprising with the current market volatility, property investment has always been geared more towards more stable, long-term financial gains. While it’s almost impossible to guarantee strong gains for the future, fortunately there are some tips we can share to put the odds in your favour.
- Choose the right property at the right time
This might seem obvious, but it’s often a case of what the heart wants versus what the brain wants. It might be tempting to grab the first property that fits your price range and requirements, but don’t! Property investment is all about capital growth, so it’s important to do your research for each potential investment to see if it’s right for you. The goal isn’t just to buy anything and hope for the best, it’s to buy an investment whose value will increase in the future. The speed and amount of this value increase will impact how soon you can buy additional investments (if that’s your goal), so sitting on your hands and waiting for the best property, not the first property, is paramount.
- Know what the right property is
A house might look great on paper, but there could be a reason why it looks like a steal. A house that’s ‘only’ twenty years old surrounded by houses less than five years old is going to look out of place. Sometimes, it’s the lack of other features, such as solar panels and water tanks, that you don’t think about until it’s too late that make the difference. There are lots of factors that will impact your property value, both generally and in its neighbourhood, so make sure that the property makes sense for the price, the location, and your needs.
- Do your research
Even if you can see the macro level trends in real estate in the area, do you know if are there external influences? Are there developments in the pipeline that could impact property prices in the future? One example might be a regional centre that has infrastructure plans in the next few years that will increase their desirability to ex-metropolitan buyers. Conversely, it could be that a government contract that provides a large number of jobs in an area is due to expire soon and the contract is likely to go to tender. If you know the major issues that can affect the broader area your property is in, you’ll have a better idea of whether that property will work for your goals. It’s important to avoid the hype that surrounds real estate purchases. There are plenty of real estate agents whispering about great deals behind the back of their hand, but they’re focused on their commission, not your future.
- Know what you’re working with
If you already have an investment property, you might have some equity to play around with. Whether or not you should access that equity is a decision you should make with the advice of a professional who’s on your side. The amount of equity and deposit that you bring to the table will affect the amount you can borrow, as well as some other items (such as mortgage insurance). If you have it, and you can spare it, let your current assets do some work for you.
- Don’t overextend your finances!
Not all investment properties are going to make you money, but chances are they won’t cost you that much either. Investment properties can be relatively cheap to maintain, but you do need to do the maths to work out the average amount that your property is likely to cost (down to a weekly or fortnightly total). Being forced to sell early because of a lack of foresight is a serious interruption to your plans, so it’s best to know what you’re getting yourself in to and knowing that you can make it through the other side. This also includes your negative gearing calculations. If this type of calculation isn’t your forte, don’t be afraid to find a professional to run the numbers for you.
- Make the property attractive to renters
This dovetails closely with number two above: your property must be attractive to renters. If you want the best price for your property, you need to make sure that you’re properly catering to your target market. Make sure your carpets and bathroom are up to scratch, and check to see the kitchen matches the space. A tiny kitchen in a four-bedroom house is a recipe for disaster! The same goes for storage — if you want to attract families, you’ll need to make sure the house is suitable for their needs. If you’re aiming for a more executive market, make sure the décor is modern and sleek, and that bright pink wall in the second bedroom might need to go.
- Manage your risks
With property management, you’ll be doing some version of the research you did before buying the property for as long as you own it. To maximise the benefits of property investment, you’ll need to be keeping an eye on the area you bought in, as well as the general real estate market for the state and possibly the whole country. If you see a problem coming on the horizon, it’s best to come up with a strategy for how you’ll react sooner than later. Again, having a team of professionals that you can trust is an asset that cannot be underestimated.
There are a lot of moving parts in property investment. Spending the time up front to do your research and make sure the property is right for you will save you a lot of time in the future, and hopefully make you more money. If you have an area you’re weak in, such as expense calculation or property research don’t be afraid to consult a professional, whether that’s your property manager or another professional that’s unattached to a property management firm. Thankfully, doing the hard work up front save you a lot of stress down the line, so while it might feel exhausting, it will save you aggravation long-term. Good luck!