April 23, 2012
Australians who are ready financially and keen to crack the property market or build on their portfolio may find that some solid hard work sees them snap up opportune purchases in today’s subdued landscape.
Making an informed purchase decision, no matter what type of property you buy - a unit, townhouse, house, granny flat, or something off the plan - will make a difference to your long term investment growth strategy.
Buying where healthy capital growth is attainable and where demand for rental properties is high is a great place to begin.
Determine if the property has some or all of the features that are high on renters’ wish lists and if the forecast rental income is solid. Is the property near parks, schools, shops, etc? Is there ample public transport and access to amenities? What about off-street or on-street parking? Are any major infrastructure projects planned for the area? What are other similar properties in the same area renting for? Taking a walk in your future tenant’s shoes can provide valuable insights on these aspects and more.
Performing online investigations through reputable property websites sites can uncover if the suburb or area you’re keen to purchase within has decent annual median price growth and rental returns. These websites also illustrate an area’s demographics (e.g. employment, cultural heritage, percentage of owners vs. renters) but don’t forget to build upon this research through local real estate agents who have first-hand knowledge of the area.
If you are lacking confidence in your ability to buy wisely then you may consider enlisting the services of a buyers’ agent. Buyers’ agents are licensed professionals that specialise in searching, evaluating and negotiating the purchase of property on behalf of the buyer.
When it comes to preparing a budget for your investment property purchase, take into account the best of times and the worst of times. Have you budgeted for fluctuating interest rates, changes in income, the likelihood of rental vacancy, agents’ fees? Do your sums to ensure you have the capacity to repay, not forgetting to budget for maintenance or renovation, should you want to make cosmetic or structural improvements over time.
You may wish to seek advice from a qualified accountant and/or financial planner who can inform you of any potential tax savings to be made from your investment property plan. For example, if you are negatively geared, you can claim a number of deductions including, but not limited to, interest paid on the loan, cost of repairs and maintenance, property management fees, travel to and from the property for inspections and repair work, as well as property depreciation. However, you still need to budget accordingly and make up the shortfall throughout the year.
Next, it is time to investigate your finance options. There is most probably a range of property loan products to weigh up against your financial situation and investment portfolio strategy. You will probably be asking yourself, interest only or principal and interest loan? Fixed or variable rate or perhaps a split? Which features are needed? Cash deposit and/or equity? Your local mortgage broker can help you compare a range of home loans from a wide range of lenders and guide you through narrowing it down to one suited to your requirements and objectives.
Once you have narrowed down your loan search, the next step is to get your paperwork organised, including record of your income, assets, liabilities and expenses. At this stage it is a good idea to apply for loan pre-approval so you can shop with confidence, with a clear sense of knowing what you can afford.
Property is often a terrific investment growth strategy if wise decisions are made early on and all pros and cons are understood. If you research the property market thoroughly, have a long-term strategy in mind and are informed about their finance options it will see you in a better position.
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"