Thinking of dipping your toe into property investment? Here are a few top tips to arm yourself with before you dive in.
Leave your feelings at the door when looking at potential properties. Unlike your home, your investment property is a business decision. Letting your emotions or personal taste rule your judgment may mean you over-capitalise on your investment, or pick a place that isn’t all that attractive to potential tenants.
Your purchasing preferences should be grounded in analysis and numbers. Is this suburb a growth area for investment? Does the expected income from the place outweigh the upfront expenses of fixing it up? Stay focused.
It’s vital that you have a thorough look at the property and surrounding neighbourhood to ensure you don’t run into any nasty surprises down the line. Enlist a professional to carry out a building inspection – this will bring to the surface any issues with the property (like hidden cracks or plumbing issues) before you purchase.
Also have a poke around the neighbourhood itself – speak to locals and real estate agents to get a solid understanding of the local market and community. You might not live there, but someone else will, and you need to consider that.
The best way to ensure you’re well-armed to tackle your first investment property is to self-educate! There are a load of online resources you can comb through – you’ll find seasoned investors sharing their experiences on blogs, forums, and video seminars.
Pro Tip: Learn the terminology, research the neighbourhoods you’re keen on, and chat to other people on the same path to broaden your knowledge.
With so much to consider, chatting to professionals like tax accountants and property experts will give you a lot more confidence in your investment decision-making and help you build on what you’ve learned through self-educating.
Some areas to consider chatting about include:
Beyond mortgage fees and re-payments, you’ll need to consider ongoing costs like council rates, maintenance and repairs, strata/body corporate fees, and taxes.
These are two types of ways to invest, with different goals and outcomes.
Essentially, positive gearing is where the income from your rental tenants is more than what you pay on loan repayments, interest, property maintenance, etc.
Negative gearing is where the rental income you receive is less than those costs, but the value of the property itself is expected to grow over time.
Neither strategy is better than the other, but having a solid understanding of the difference between the two will guide you towards which is right for you.