The 12 smart buying tips to secure you first residential investment property
Do your homework. Especially when it comes to ascertaining the history of capital growth of the property, in the suburb and even the likelihood of any huge increase in rival housing stock. Overpaying because you haven’t done enough research will be the most telling of factors no matter what happens to the overall economy.
As too many random inspections will only confuse you – and wear your commitment down – make a preliminary, but adaptable, list of what you actually want in an investment. Narrow your aim and search requirements – house or unit, old or new? Price growth or yield?
Research the capabilities of the existing infrastructure and the potential and likelihood for improved infrastructure in the locality.
Make sure you know exactly how much money you reasonably have to buy with and stay under budget, if possible, unless it's a remarkable opportunity. Be aware of just how much of the rental income your bank will take into account when working out your borrowing capability. Pick the right type of mortgage that suits you. Discuss with your accountant the pros and cons of using the equity from your principle place of residence.
Factor in stamp duty, building inspection report price, rates, insurances, and any likely needed repairs so your list of expenditure costs leaves little to chance. Even build in a buffer. Get early advice from your accountant too especially when it comes to the likelihood of depreciation benefits, land tax and capital gains tax.
Don't let emotion govern your purchasing decision. Have at the top of mind what actually suits the demographics of renters in the location and how much would they typically expect to pay for it.
Don't buy the best property in the block or on the street or the suburb. Ideally buy below the median price so that any improvements take its resale price to just over the median price bracket.
Vary the time of day you inspect the pinpointed property. Take along a friend or family member when you do your final pre-purchase inspection as even untrained eyes might spot flaws you may have missed. Get an official report on the condition of the property.
Bounce the purchase price details with an estate agent unrelated to the property. Or engage a buyer's agent. Remember that property is a long-term investment and you shouldn't rely on rising prices in the short term, especially if you want to cover your purchase and exit costs.
Do not be afraid to make repeated substantially lower offers than the asking price.
Take your time and never sign any contract unless you understand what you are getting into, especially if you are being unduly pressured by the sales person.
Start your ongoing continuous research into the rental market in the suburb well before you intend to buy, thereby keeping tabs on rental price direction and how long are properties are vacant between tenants. And then check with a local property manager to confirm the potential rent of any property you are about to purchase.
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