Tips on buying an Investment Property
Knowing where, what and when to buy can massively affect your return on investment. The following tips can assist to make better property investment decisions.
Where to buy
Think twice about investing in property markets you are not familiar with. Look for areas where high growth is expected. Make sure extensive research is available on the suburb before buying. Average yields, historical and forecasted growth, density and numbers of owners living in the area all contribute to positive growth. Look for areas where rental income is considered high compared to the general property values in an area.
Research recent sale prices to give you an idea of what you can expect to pay for property in the same area.
Find out about the vacancy rates in the neighborhood. A high vacancy rate may indicate a less desirable area. This may make it harder to rent the property and may make it difficult to sell in the future.
Research proposed changes in the suburb that may affect future prices. Things like planned developments or zoning changes can affect the future value of a property. Don’t assume that last year’s boom will continue this year.
What to buy
Look for properties with features that will appeal to as many people as possible, such as a second bathroom, lock up garage or somewhere close to shops, schools and transport.
Look for a property that will attract more than one segment of the rental market such as singles, couples, young families or retirees.
Low maintenance costs are important.
Units can be easier to maintain than houses, although you will be required to pay body corporate fees.
When to buy
There really isn’t ever a bad to time to buy an investment property. Some areas will go through periods where there are top high to consider, but often there will be lot of good properties available in other areas close by.
Interest rates have never been lower; they are at a historical low. This means that rental income can often cover the costs of your loan and this is important on determining when to buy.
Some Australian states have increased stamp duty and/or putting in place new property taxes for people investing in property. It is important to understand state taxes before committing to purchasing a property for investment.os
Buying, selling and managing an investment property can be costly and will affect your overall return. Here are a few of the general costs to consider:
- Stamp Duty
- Conveyancing fees
- Legal costs
- Search fees
- Pest and building reports
Ongoing costs post settlement
- Council rates
- Water rates
- Land tax
- Property management fees
- Repairs and maintenance costs
Costs of selling a property
- Agent’s fees
- Advertising costs
- Legal fees
- If the amount you sell the property for is greater than the amount you paid for it, you will be subject to Capital Gains Tax