The questions you need to ask when it comes to buying an investment property
Is this your first investment property, or your next investment property?
Here are some things you need to think about when it comes to investment properties:
What do you want out of this investment property from a financial sense?
- High rental return?
- Good rental return and good capital growth; or
- Strong long-term capital growth in a blue chip area, where the rental return may not be as strong?
What do you want out of this investment property from a personal sense, or an emotional sense?
- Is this purely a commercial decision to build a portfolio of properties, where each property achieves the set goal rental return?
- Is this a property that you would want to live in one day?
- Is this a property that you would want as a holiday home?
What sort of property will you buy?
- Older house on a big block that has development potential, or could be done up and sold for profit?
- New house on smaller block to be able to claim good depreciation from the start?
Do you know the different types of titles and what this means when buying a property? There is…
- Torrens title… you own the land and any improvements, and this would generally have better capital growth.
- Community Title… there is some common land that is open to be used by all owners in the group. Steady capital growth.
- Strata Title… you own the space inside the walls and there is a lot of common land/property, being driveways, garden etc that attract a strata fee to be paid to the body corporate to enable upkeep of the land and external building. Slower capital growth.
These properties will all have a price point, or entry to the market.
Where are you thinking of buying?
- In your same suburb that you know and love, and can keep an eye on it?
- In a different suburb in your same State, where it’s still accessible to keep an eye on?
- In a different State where the capital growth prediction is higher, and maybe where Stamp Duty is less?
How do you choose the right suburb?
- Firstly, understand what you want from the property, is this an emotional or commercial decision, and what sort of property and title you are looking for?
- What is your budget?
Do you really know the difference between paying principal and interest, or interest only on this investment loan, and how this affects your overall strategy? This will be determined by all of the points I have raised above, as to your ‘WHY’ for the property.
What can you afford and how do you work this out? Make an appointment with me (Monica!) so we can discuss all of the above, and design your road map for your investment property. This is your life, your road map, and everyone’s is different, and that’s ok.
Are you thinking there is a lot to think about? Well there is! So don’t make this decision lightly, and onboard the right experts to help you flesh out your WHY, so you can make educated decisions to know your ‘what’, ‘when’ and ‘where’ to reach your financial goals.
MAKING FINANCE MAKE SENSE is what I do.