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Dougmal Harcourts - The Property People

Friday, 24 October 2014

Getting Started in Property Investment

When it comes to building a retirement nest egg for the future, property is still viewed as one of the safest long-term investments.

While some investors may want to buy and rent it out straight away, others may choose to live in the home while they renovate it.

Investing in bricks and mortar can be a great way to create wealth, but there are a few things to consider before diving into property investment.

Know your budget
It’s essential to have a thorough understanding of your cash flow. You should ask your bank for pre-approval of your investment loan so you know how much you are able to borrow before you start your property hunt.

Don’t underestimate ongoing costs
Make sure your budget allows for extra costs such as insurance, and general maintenance and repairs.

Buy in a growth area
Find a property in an area where there is strong demand for rental properties. Buying close to schools, universities, public transport and shopping centres will make it more appealing to renters.

Be realistic about your investment goals
Are you looking for fast capital growth, or do you want to hold the property long term? During a strong market period, it will be easier to renovate properties and sell them for quick profit. But in slower economic times, it can take years to achieve the same growth.

Look for essential, not extravagance
A rental property only has to be functional and clean. Don’t over capitalise or be persuaded to buy a property simply because it has a stylish interior.

Think carefully before negative gearing
If the rent you receive does not fully cover your loan repayments, your property will be negatively geared. This can have tax advantages, but it will also lead to financial stress if you don’t have the cash flow to cover loan repayments, rates or body corporate fees.

Still paying off your home?
It isn’t necessary to have your home completely paid off before purchasing an investment property, however it is a good idea to have a large portion of your own home paid off along with other debts such as credit cards. 

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