Did you know almost 50% of New Years’ resolutions are financial ones? For some this will include buying their own investment property and starting the journey towards owning a rewarding investment portfolio.
First time investors may be wondering how buying an investment property is different to buying your own home. Surely the process is the same? Yes – it is! However, the way you weigh certain criteria when purchasing an investment property is different. Essentially you are shopping for someone else – your tenants. It’s important to take your emotion out of the decision.
Does the property fit the location? For example: a small unit in a family friendly suburb with schools and parks won’t be as attractive to the families who wish to live in that area. However, the same small unit in the centre of town close to work and entertainment, might be very attractive to a single working professional.
Try thinking like a prospective tenant. What facilities and services would be valuable to them? For example: parking versus access to public transport, heating and cooling, appliances and storage.
Type of Property
Think about your ideal tenant. Who are you targeting? Consider what’s attractive to them. For example: students sharing a house may need large bedrooms with study space or multiple bathroom facilities. Families would need secure outdoor spaces while elderly residents might wish to avoid split level homes or stairs. Try to align the location, the type of property and your ideal tenant.
You will need to consider who are your prospective tenants? If a property is already rented you will have historical data. If the property doesn’t have a rental history, what’s the expected market rent? Do your research, engage with a Property Investment Consultant like our own Vickie van Heuzen who understands the Wagga market.
In some cases, you may need as much as 20% deposit on a property. Purchasers also need to factor in application fees, stamp duty, conveyancing and/or legal costs and allow a budget to cover pest, building and/or engineering inspections depending on the property.
Also allow for capital expenditure. Arrange a depreciation schedule to understand what depreciation will apply to your fixtures and fittings each financial year.
Remember to budget for Landlord insurance in addition to your building insurance, this is essential for such an important asset.
Repairs & Improvements
There are regulations governing the condition of rental properties in NSW. This means that your new property may require some repairs in order to comply with legislation before you can offer it for lease. Items such as smoke alarms, locks on windows and doors, water efficiency, pool compliance, ventilation, services and appliances are some of the most common considerations. Depending on the type of property you choose, it may be a good idea to set aside a budget to ensure it can be brought up to spec. Again, it’s a good idea to consult an investment property consultant, like Vickie Van Heuzen for a review prior to purchasing.
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