Investing in property can be an intimidating prospect, particularly if you’re new to the investment game. We asked a host of experienced Aussie investors to share their secrets to success – and the mistakes to avoid at all costs.
1. Skipping the research
It may seem obvious, but understanding where and what you are buying will help determine your long-term profits.
Get to know the suburb you are looking to buy in, including the demand for rentals, and the demographic and needs of your prospective tenant. Young working professionals, for example, will be looking for a different property to rent than a growing family.
Investor, Jo, owns two properties in Western Sydney and two properties 45 minutes north of Brisbane, and has recently sold a fifth property in Randwick. Research, she says, is what puts her ahead of the game.
“If you are confident in what you are buying, you will be able to make decisions quickly without emotion and get a deal tied up while other potential buyers are still considering their options,” says Jo.
Investor, Chris, agrees.
“We did our research, used a good letting agent bought in a desirable location, kept the place neat and tidy and renovated so someone would want to rent it. We also had a strata company that allowed pets – a big plus. It’s been rented out for three years,” he says.
2. Failing to have a long-term plan
Know the purpose of buying your property. Are you after short-term or long-term gains? Are you planning to one day live in the property or is it a straight investment? What type of property will help you to meet your income goals?
All these questions may need to be answered before you sign on the dotted line.
“If it’s a long-term purchase, then make sure that there will be good capital growth rather than rental yield,” says Adam, who owns four properties across Victoria and NSW.
3. Forgetting the fine print
Particularly if you are considering building off the plan or in a modern estate, make sure you read the fine print says investor Caleb, who has owned numerous investment properties in Victoria.
“Make sure you are well versed in all of the restrictions and covenants, including any heritage overlays. This is particularly important, as it can completely throw out what you planned on building,” he says.
“For example, I built a property and had to bring a fence forward so a trailer or work car could be parked behind the fence line, as they were not allowed to be parked on the street.”
4. Getting bogged down in the details
Investment properties don’t necessarily need to be pretty to make money. Location, price and quality of build can trump pristine interior design in terms of long-term value, say our investors.
Be objective and analytical in your choices.
“Take the emotion out of it. If the numbers stack up, then go for it. Remember: you aren’t going to be living in it, so don’t worry if you don’t like the carpet or the layout isn’t quite what you’d want,” says Jo.
5. Thinking location doesn’t matter as much as it does
A good location not only increases your chances of securing a quality tenant, but will also affect how your property appreciates in value.
“Consider property density when buying: if there is a lot of availability in an area then probably avoid it – scarce is usually better. Think supply and demand,” says Adam.
Pay attention to the property’s proximity to the CBD or regional centres and steer clear of noisy main roads that may deter renters.
6. Failing to buy within your budget
Considering what you can afford in terms of repayments, ongoing and hidden costs is vital.
“If there is no way you can afford the property and still live your life, it can get you into trouble quickly,” says Steve, who owns two investment properties in Western Australia.
“That said, don’t procrastinate! We [my wife and I] could have bought a CBD property a lot earlier, and chose to wait – now those properties that went for nothing are worth triple.”
7. Going all in with no plan b
Caleb suggests putting cash aside for any unforeseen expenses, particularly if you are building. Think alterations or changes to construction, long vacancy periods and maintenance issues.
“For every investment property I’ve worked on, I’ve also made sure that the mortgages were budgeted with an interest rate much higher than I was on, which puts me in a better position for any interest rate increases.”
“We shopped around for the right home loans via a broker and were able to fix a good principal and variable rate for two years,” he says.
Are you ready to chat to an Aussie Broker about finding the right investment loan for you? Make a free appointment today.