5 Things To Know Before Buying An Investment Property
To make sure you buy the right real estate investment property you’ll need to do your homework, including seeking out local market knowledge.
Whether you’re buying your first investment property to break into market, or your fifth, here are some of the most important things to know before you take the plunge.
1. Long-term investments require research
For many investors, a long-term increase in value is more important than immediate rental returns. In this case, it’s important to make the most strategic purchase possible that will give you the best chance of a high sale price in the future. Finding the suburbs that are most likely to grow in price over the long term is a matter of researching the figures, talking to experts and avoiding some areas that are already seen as fashionable, as these locations may not have much room left to grow.
2. High rental returns depend on supply
If the immediate benefit of high rental returns from your investment property is your top priority, buying in a sought-after area is likely to be your aim. But it’s also important to make sure you don’t end up buying in a market that is already offering many similar properties—or about to be flooded with them. Take the time to look into any upcoming developments or land releases and consider how these might affect the desirability of your investment.
3. Good property management matters
Along with its location, one of the most important factors in the long-term value of your investment will be the relationship you have with your property manager. Working with someone who is organised and able to communicate effectively with both you and your tenants means problem areas can be addressed with minimal fuss and vacant periods can be kept to a minimum. A good property manager can work with you to keep the value of your investment high.
4. Don’t make negative gearing your focus
You may be planning to buy an investment property that is ‘negatively geared’. This happens when the rent you receive is less than the cost of owning the property overall. It is important to consider the tax deductions you can claim on a negatively geared property, but this shouldn’t be the only deciding factor. Your financial circumstances and government policy may change in the future, making deductions less important than sale price.
5. Approach off-the-plan investments with knowledge
Off-the-plan properties are a fixture of the NSW property landscape, and while they are the right investment choice for some buyers, there are also risks to consider. Make sure you know the background of the developer, inspect previously completed properties by the same company, and get clear legal advice to understand your contract inside out.
Be mindful when buying an investment property that it is just that: an investment. You don’t have to want to live in it, or in the area, yourself.
Property investing takes some research and planning, but taking the right steps to buy an investment property that truly meets your needs can make a significant contribution to your long-term financial stability.