What to Consider Before Investing in Property

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Is 2022 the year you start investing in property?

Property has long been considered one of the best and most reliable ways to build wealth in Australia.

According to the ATO, two million of us are owners of investment properties, with the majority of investment taking place in our three major cities.

If you’re thinking about building wealth with investment property, it pays to think about a few things before you put in a call to your bank manager.

What are my long-term objectives?

Having long-term goals when it comes to investment property can help you weather the inevitable ups and downs in the property market and stop you making impulsive decisions.

Are you hoping to build wealth, increase your asset portfolio, retire early, leave your children an inheritance – or a combination of all of these things?

Knowing what you want to achieve will help you decide what your investments strategy will be, how long it will take and how much risk you can tolerate.

This is a good lead-in to the next question:

How much time do I have?

Starting an investment portfolio at age thirty is a different proposition to starting one at fifty. While at thirty you may have more time (and may be possibly open to more risk being younger), you generally earn less and have few assets, so your borrowing capacity will be less, however, time is on your side, and younger people can be less risk-averse.

The later you start investing,  the more risk you may have to tolerate in order to achieve your goals.

What is my budget?

Depending on your age and what stage of your life you are at, your budget may initially be modest (especially if you are buying your first investment property). You will also be limited by the equity you have in any existing properties, the amount of debt you hold, and other ongoing expenses.

The cost of an investment property doesn’t begin and end with the purchase price. You should also factor in stamp duty, legal costs, lender’s mortgage insurance, a building inspections, and the ongoing maintenance, cleaning and repair costs that come with being a landlord (link to blog on being a landlord).

Investors should factor in having to pay the mortgage on their investment property during periods when the property is untenanted, and should be able to absorb rises in the mortgage repayments if interest rates go up.

Before you start looking, sit down and work out your budget for a property, factoring in all the associated expenses, such as stamp duty, conveyancing fees, building and pest inspections, lender’s mortgage insurance and cleaning or renovation costs. It’s also a good idea to budget for repair and maintenance costs, rises in interest rates and any period where the property may be untenanted, in your budget.

How am I going to go about it?

What kind of property will you buy and how will you go about finding it?

There is a lot of information available to anyone who is investigating an area for an investment property.

Think about the areas you might like to live in – these are the areas that your potential tenants would also choose. Can you afford to buy in these areas?

A good investment property is in an area that will experience capital growth, with good access to transport, schools, sports facilities and other local amenities and ideally an existing property, as these tend to experience better capital growth than brand new or off-the-plan properties (in particular, apartments in big blocks).

Areas close to the CBD of our major cities, with good lifestyle and entertainment options, where families and professional couples are moving in are a good bet.

If you are not sure about the best place to buy, or will be buying in an area you don’t know, consider using the services of buyer’s agent or buyer’s advocate.

This leads to another important question – what kind of property to buy? Will you buy a house or a smaller property such as a unit or apartment. Will you buy it by yourself or in tandem with someone else?

Buying in an area you are not familiar with can have pitfalls, so make sure you have done enough research before you sign anything.

There is also the option of buying a block of land and building the property yourself. Keep in mind you will need a substantial budget for this option

What Type of Property?

What kind of budget do you have to invest in property? Have you decided on buying a house or an apartment and if so, will you buy in the area you live in, interstate or even overseas? An apartment or unit generally experiences less capital growth than a house, however this depends on the location of the property, the size of the block of land, and the desirability of the area.

When should I buy?

While timing is an important factor when buying property, it should not be the deciding factor in all instances.

Looking for an experienced and reputable building inspection company?

If you are buying, selling, building or renovating an investment property, The Home Inspection Hub can help.

The Home Inspection Hub are the residential inspection professionals.

We conduct all types of residential inspections throughout Melbourne, Geelong and Central Victoria:

  • Pre-Purchase House Inspections
  • Building and Pest Inspections with Crunch Pest Control
  • New Home Construction Inspections – all stages as well as Contract Review, Stand-Alone PCI and Maintenance Inspections
  • Owner Builder Defects (137B) Reports
  • Special Purpose Inspections
  • VCAT Reports and Expert Witness
  • Tax Depreciation Reports
  • Building Dispute Reports

We offer:

With over 20,000 inspections under our belt and an established reputation,  The Home Inspection Hub provides peace of mind for the biggest purchase you will ever make.

Call us today on 1300 071 283 or email info@thehomeinspectionhub.com.au and see how we can assist you in your investment property journey.