May 15, 2015
With interest rates sitting at historical lows, vacancy rates falling and property prices rising across many key markets, now is a great time to consider purchasing an investment property.
In Penrith, house values have climbed by more than 21% over the last 12 months, while unit values have soared 17.6%.
New research conducted by RP Data would suggest this recent growth in property values is unlikely to slow down any time soon.
According to RP Data, Sydney values have climbed by 5.4% over the last quarter alone.
Further, the residential vacancy rate for Sydney is incredibly low, sitting at just under 3%. In Penrith, the vacancy rate is less than 2.5% - dropping from 3% over the last six months.
While there are great gains to be made from purchasing property in the right place at the right time, it is important for potential property investors to do their research and make sure they are know what they are getting themselves into before jumping in feet first.
Thankfully, there are a few easy steps that all ambitious property investors can follow to ensure they make the right decision/s for their needs, including:
Step 1: Create a long-term property portfolio plan
Realise that investing in property is usually a long-term strategy. The housing market is generally a 7-10 year cycle; it’s a rollercoaster ride that has highs, lows and steady patches. As such, it is important to ensure you are comfortable with the advantages and disadvantages associated with a particular investment asset. Consider your goals and all possible outcomes. For example, you may find a fantastic long-term tenant or you may have trouble keeping tenants – will you be able to afford the rent money lost and increased property agent costs involved if this happens?
Step 2: Factor in all costs
When you buy an investment property, you shouldn’t enter into the arrangement expecting to make money. Understand the cost of the mortgage and ask yourself whether or not you can afford it without any rental assistance. In addition, it is important to factor in repairs and maintenance fees as well as other costs including water bills, strata management fees etc and make sure you can comfortably afford all of these costs. Keep in mind that the interest and related expenses you incur (such as repairs and maintenance) are tax deductible. If your loan repayments, fees and other costs exceed your rental income, the net loss can be offset against other income you derive, meaning you will be able to reduce the amount of tax payable on your other income.
Step 3: Do your research
When you are thinking about purchasing an investment property, it is important to do your research. Read property-related articles, search the internet and talk to people in the know. Find out each area’s average rental yields, what infrastructure there is in your desired suburb, and the property price growth that the area has experienced over the last 7 to 10 years.
Step 4: Choose a loan tailored to your current needs
Depending on your monetary situation and current investment portfolio, there are a range of property loan products for you to consider. Will you go with an interest only or a principal and interest loan? Fixed or variable rate? Which features are needed? As your local mortgage broker in Penrith, I can help you find and apply for a loan that suits your needs and lifestyle – both now and into the future.
Step 5: Buy a property that will meet your tenant’s needs
Buying an investment property is very different to purchasing an owner-occupied property. For starters, you are not looking for your ideal home, you are looking for a home that will suit a wide range of potential tenants. When looking at property, ask yourself: is this close to local amenities including schools, cafes, shops, hospitals and public transport? Finding a place that is close to all the ‘essentials’ will ensure it appeals to tenants.
As you can see, there is a lot of things you need to consider before purchasing an investment property, as such, it pays to speak with a professional.
At Mortgage Choice in Penrith, we can offer home loan and local property market advice to ensure you not only find the right property but the right mortgage for your needs.