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Successful property investing calls for one key ingredient - planning. A rental property is a substantial financial commitment and you’ll achieve the best results if you take the time to get good advice and plan carefully before you act.
Are you well placed to afford an investment property, particularly during the inevitable periods of vacancy?
Can you afford a property that will attract decent tenants and deliver healthy long term price increases?
Are you prepared, and can afford, to hold onto your investment for the long term? Will you need access to your capital (money invested) in the near future?
Your investment property will ideally meet two key criteria - being affordable for you, and appealing to a wide range of tenants.
In the first few years of being a landlord, it's likely your property will be negatively geared, which means it costs more to own the property than it earns in rental income. While this can offer tax savings, you still need to be confident that you can cope with the expenses. Even the best properties experience some periods of vacancy, so you also need to be able to cover loan repayments when the property is not generating income.
No matter how affordable a property is for you, it won’t be a successful investment if it doesn't attract quality tenants. Consider properties objectively and think about whether you’d be happy to live there. If you're not sure, prospective tenants are likely to think twice too. See our section on finding the right investment property for more details on enhancing tenant appeal.
Once you have a clear picture of your current position, your personal goals and your ability to afford an investment property, you’re ready to start creating - or adding to - your investment property portfolio!
Aim to invest in an area with a low vacancy rate
Local real estate agents should be able to provide this figure. A vacancy rate below 3% indicates an undersupply of rental properties, which means you can afford to charge a decent rent and experience fewer periods of vacancy.