Get the groundwork right to enjoy success with your first rental property.
Investing in property can bring tremendous financial rewards and a great sense of personal achievement. But there's more to successful investing than picking up a cheapie property and hanging out the ‘To Let' sign.
If you're investing in property for the first time, take a look at our six tips for success.
Crunch the numbers
Owning a property means more than being able to afford a deposit. In addition to upfront costs like stamp duty, your rental property will also come with the inevitable repair and maintenance bills plus regular outgoings like rates and insurance. Sure, the rent will cover a fair chunk of these expenses, but what if place is vacant?
The solution is to draft a budget. Allow for around four weeks of vacancy per year, and see if your finances can handle the cost.
Consider your long term plan
Property can work best as an investment when you hold onto a place for the long term – at least five years, preferably ten or more. If you have major costs coming up in the next few years like a wedding or plans to start a business, think twice before sinking all your cash into a rental property.
Know the market
Your Mortgage Choice broker can give you a clear idea of your borrowing capacity and this should set the framework for where you can afford to invest. Look for areas with a high proportion of renters – and this usually means suburbs that are well-serviced by public transport with lots of local amenities like schools and shops.
Buy with your head not your heart
A cute character cottage may be a wonderful place for an owner occupier but as an investor it pays to look for properties with tenant appeal. That means low maintenance gardens, off-street parking and plenty of storage with built-in wardrobes and cupboard space. Think about what matters to a tenant and put your personal tastes to one side.
Check the condition of the property
A renovator's delight may be available at a bargain price but tenants don't want to live in rundown homes. In addition, the Tax Office has very strict rules about claiming the cost of repairs and renovations. Don't assume you can immediately write off the costs of improvements on tax – speak with your accountant for tailored tax advice.
Ultimately, buying a property that's in good condition can make it easier to attract and hold onto long term tenants while also keeping a lid on repair bills.
Have the right loan in place
Your investment loan will play a key role in the success of your rental property. A competitive rate is important though loan features can be critical to managing cashflow.
Recent change to investor lending by banking watchdog APRA make it critical to seek expert advice on the investment loan you use to fund your rental property.
Your Mortgage Choice broker can provide expert help and local knowledge to let you make the most of your first investment property. Call us today on 13 77 62 to discover how you too can become a property investor.