It’s no secret that buying a property is one of the best investment decisions that you can make. Property investment is far more predictable than shares or crypto, for example, which can be massively volatile in unstable economic times. Investing in property allows you to benefit from tax advantages while gaining predictable cash flow and great returns.
The current demand for rental properties is increasing faster than ever, and with a rise in house prices, it’s also more lucrative than ever. So, if you’re after a tried-and-tested way to invest your money, buying a property should be at the top of your list.
This article will walk you through our top 10 tips to help you buy your first investment property and ensure you get the most out of your investment for future financial security.
Want some help choosing the right property? Book a discovery call with Capital Properties today. As investment specialists, it’s our mission to help Defence personnel and others attain future financial security.
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Here’s Capital Properties 10 top tips to help you buy your first investment property:
- Choosing the right location is key.
- Check the condition of the property & don’t over-capitalise on improvements.
- Make sure you have time to invest in your property investment or hire an expert to help.
- Stay updated on regulations & property maintenance.
- Research thoroughly before buying your investment property.
- Work out your budget, including projected expenses & profit.
- Refrain from making emotionally charged decisions or let our expert Buyer’s Agent Service team negotiate for you.
- Choose investment partners wisely & clearly assign duties & tasks.
- Be finance ready – seeking pre-approval for a home loan is free, easy & will save you money.
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What is an investment property?
Let’s start by taking a closer look at what an investment property is. Simply put, an investment property is a residential or commercial property that’s purchased as a financial investment – i.e., it’s an asset that you can make money from through renting or adding value and re-selling. Therefore, it’s not usually your home/primary residence.
Some properties will have more income or investment potential than others, so it’s vital to know what to look for when you go to buy your first investment property.
What you need to know before you buy your first investment property
When you decide to invest in real estate or if it’s time to add to your current portfolio, here are some of our top tips to buying an investment property.
- Location. Location. Location.
We’ve all heard that location is important, but are you sure you know what to look for in a location for an investment property? Residential tenants require properties that are close to amenities. For most tenants, that includes easy access to public transport or main arterial roads. Families require local schools, shops, medical clinics etc. Singles/young couples want shops, restaurants, bars and safe public spaces. Commercial properties need high foot traffic and/or extensive parking. Remember, a more desirable location will have increased demand and can command a higher rent.
One thing to note is that some up-and-coming areas may have a higher potential to increase in value over time than already popular areas. Although this is true in many cases, bear in mind there’s more risk involved when investing in an unproven location.
- Condition of the property
Another important consideration when buying an investment property is the condition of the property at the time of purchase. Although taking on a fixer-upper ensures there’s potential to gain more capital, you need to be certain that the cost and effort pays off when it comes to selling.
Carrying out an extensive renovation and over-capitalising is likely to result in less profit. Especially when you consider the time it takes to complete the project, the costs of improvements, including paying skilled trades, building materials, bank fees etc., as well as the ability to recover your investment due to delayed rent collections.
As a first-time buyer, negotiating the purchase your first investment property can be time-consuming and stressful. And as your investment portfolio grows, it will place even more demands on your time.
If you have a full-time job, you’re already likely to be juggling many responsibilities. And it’s even more of a burden if you’re deployed away from home or overseas. That’s why the Capital Properties team strongly advises that you consider hiring a property manager to help with the workload and carry the stress! We’ve talked about building a property investment ‘A-team’ before here. You won’t regret it.
Becoming a landlord is not easy. It’s your responsibility to be aware of current codes and regulations concerning rental properties and the rights of your tenants. For example, there are extensive regulations surrounding repairs and maintenance of the property, including swimming pools, smoke alarms, gas safety and other facilities that may be part of the property.
These laws change often and vary in each state and territory. Falling behind may make you unwittingly liable if you don’t stay informed.
- Do your research
It goes without saying yet deserves repeating: it’s 100% vital to do thorough research before you buy your first investment property. From location to loan type, regulations, area demand and more, you need to be across every aspect of the property you’re considering investing in.
Capital Properties book “The Property Investment Book for Switched On People” shares expert investment advice and is a must read for first-time investors and anyone looking to expand their property portfolio.
- Manage your budget
Before you buy your first investment property, it’s fundamental to work out your projected expenses and profit. Capital Properties investment toolkit will help you make sense of the numbers. Our free online calculators, spreadsheets, checklists, and apps will help you make well-informed property investment decisions.
The Capital Properties Budget Planner tool makes budgeting a streamlined process and will ensure you don’t forget anything and end up with potentially costly ‘hidden’ expense. And our Property Investor Planner helps you to generate an accurate annual budget for all of your investments.
- Be aware of making emotional decisions
Buying a property is always going to be an emotional process. Excitement, worry, pride, joy… it can be a lot! But when it comes to buying your first investment property, it’s important to remain logical.
Think of it as strictly business and try to negotiate as logically as possible to get the best results. If you find it difficult to remain emotionally detached, our expert Buyer’s Agent Service team can help you.
- Choose your partners well
Investing in a property with a partner can be a fantastic way to spread the financial burden and risk, but it can also go horribly wrong. So, it’s essential to calculate the pros and cons of the partnership before you leap in.
Do you trust this person? How well do you know them? Are you fully aware of their financial status? How will you divvy up the operational responsibilities and financial aspects of the investment expenses and profits? Are you protected if the partnership becomes untenable?
Again, having an investment partner is a great option, but being open, honest, and thorough when assigning duties and tasks is crucial to maintaining a good relationship.
- Prepare for negotiations
Negotiations are a vital part of every property transaction. Starting with securing finance, to the purchase of the property, to dealing with any maintenance/construction, to finding the right tenants. You need to understand the negotiation process and be prepared before you dive in.
Don’t want to deal with the stress of negotiation? Then let our buyer’s agent services negotiate expertly on your behalf instead. It’ll save you time, stress and money.
- Be finance ready
Obtaining pre-approval for a home loan is free, easy and will probably end up saving you money. Receiving pre-approval and knowing your budget means you can negotiate from a position of strength and help you secure a great deal.
Our blog post “Why being finance ready pays dividends” is worth a quick read.
Need help with your first investment property?
Your chances of making a profit when you buy your first investment property are significantly increased when you work with experts who understand the investment property industry.
At Capital Properties, our mission is to guide you in your property investment journey and support you to make the best property decision. We’re always available to chat and offer helpful information, so book a free Discovery Session today and let us help you work towards your future financial security.