Buying a property is possibly one of the biggest purchases you will ever make, and with an overwhelming amount of often conflicting information, it helps to understand how to make the right decision for your circumstances.
Here is a list of 10 important factors to consider:
1. Set your property investment goals
Be clear and realistic on what you want to achieve from a long-term perspective, and remember that property investment should be treated as a medium to long-term investment.
2. Seek financial and tax advice
Purchasing a property can have significant tax and financial implications, so it’s important to obtain advice around your investment strategy, appropriate ownership structures and possible tax advantages. In fact, your investment property purchase should help support your overall financial and lifestyle goals, so speak to an expert for an understanding of the big picture.
3. Know your purchasing budgetBefore you start looking at potential properties, it’s important to obtain advice around your borrowing capacity from a mortgage broker. Lending criteria and loan application processes have changed considerably due to COVID-19, and it helps to be clear on your position before you spend too much time researching properties.
4. Establish the briefOnce you are clear on your strategy and your borrowing capacity, start to develop a brief of the ideal property, including location, property type, aspect, design, and return on investment.
5. Follow solid investment principals and indicatorsFollow solid investment principals & indicators such as employment, population growth, infrastructure investment, and lifestyle. There is often much hype about the “next property hot spot” so make sure you consider the fundamental indicators too.
6. Take the emotion out of a property investmentBuying an investment property can be very exciting, but emotions can lead to less than ideal decisions. Try to invest with your head and not your heart!
7. Utilise Federal and State purchasing grants, exemptions and stimulus packagesThere are many incentives and grants currently available for first home owners, first home builders, and those planning renovations, so make sure you look into these options and whether they might apply to you.
8. COVID-19 may uncover value and opportunitiesBe open to opportunities that may arise due to an oversupply or less demand for properties, which can then lead to discounted stock.
9. Consider “Rent-vesting”Rentvesting is when you purchase a property as an investment while living in a rental property yourself. This may be an option if you want to live in an area where you cannot afford to purchase right now – so effectively you rent a property that’s right for your lifestyle whilst owning an investment property that works for your budget. There are pros and cons for rentvesting so it’s important to seek property and tax advice to fully understand the options.
10. Remember to complete your own due diligence before investingDuring the process of purchasing a property there will be plenty of information provided by real estate agents but it helps to do your own research too, for example:
- Research the suburb and the area (take a drive if possible)
- Compile a suburb demographic profile
- Be aware of any adverse risk of flood, fire, noise, or environmental impacts
- Consider school catchment zones
- Review historical capital growth
- Do your own research on comparable sold and rented properties
- Arrange a building Inspection report