6 Important Questions to Ask Before Investing in a Property
When deciding whether or not to take the plunge and secure an investment property, it always pays to be diligent. Here are list of 6 important questions you should ask before making your final decision.
Are you ready to make an investment?
Investing in real estate isn’t a get rich quick scheme, but rather a way to let your net worth work for you. It is important to talk to a financial advisor to see whether or not real estate is a good fit for you, your family and your overall financial plan. One unfortunate mistake that many first time investors make, is in underestimating the expenses often associated with investment property. You will need to consider the cost of repairs that may arise, ranging from inexpensive to costly. It’s important to note that you will also be responsible for ongoing costs such as council and water rates, insurance, body corporate fees, land tax and property management fees.
What is being built nearby?
It is always valuable to know what developments and infrastructures are taking place, or being planned, within the area. Although this can be beneficial to your investment property, it can also, at times, be damaging. In order to learn more about the types of developments in your area of interest, visit the following website www.infrastructureaustralia.gov.au. This has links to all state infrastructure planning departments.
What is happening in the local market?
The best way to understand what is happening within the local area, is to get out there and see for yourself. Visit the local retailers to gain an appreciation of the standard they uphold. This is also a great way to see whether there have been any recent renovations or improvements in the area, or if these are about to take place. It is also important to look at local crime rates, population of the area and growth of employment. To learn more, it is wise to look on the Australian Bureau of Statistics website www.abs.gov.au
Capital Gains vs Rental Return?
Whilst a healthy rental return will allow you to hold onto the property, it won’t help you buy again. Capital gain should therefore, be your main priority and will allow you to continue to buy properties. If you look for only high rental return, without considering capital growth, you may be waiting a long time before you have enough equity to grow your portfolio.
Is there competition?
It is important to do your research. A market flooded with investors can dramatically reduce your chances of a significant rental return and can also stir up issues around capital appreciation. It is wise to contact the local council to see what percentage of homes are owner occupied. Take particular caution with big apartment blocks. You may end up with both rental and selling competition if the market suddenly takes a turn for the worse.
Who is your target market?
Identifying your potential tenants should be at the forefront of your mind when considering what property to invest in. If you’re going for the family market, you should be looking at larger homes with a garden and spacious living areas. School zoning and child friendly community facilities are also extremely important. If, on the other hand, you’re looking at investing in a University town, you should consider buying a multiple occupancy home that is close to transport and amenities.
Investing in property is a significant financial commitment, so we recommend doing substantial homework beforehand. If you are in need of advice, please contact Stockdale & Leggo on 03 9529 4955 and we’ll put you in touch with the office nearest to you.