With interest rates at record lows in Australia, now is a great time to consider purchasing an investment property. Smart investors understand the value of including a few investment properties in their portfolios. Real estate adds diversification and is considered a relatively low-risk investment. With the right investment properties, it is possible to tuck away a tidy sum toward retirement savings.
Before leaping in head-first, take time to consult with real estate professionals and investment experts who can help you get the most bang for your investment dollars. Following these tips can help guide first-time property investors.
Explore your options
There are two common ways to make money with investment properties. The first involves purchasing a property as is and holding it as a rental and allowing the property value to increase over time.
The second option is for investors to purchase a property that needs improving. This could be smaller scale works such as updated paint and flooring, or mor major works and renovations. This approach allows for a quicker increase in the property value and rental returns.
Whether looking to purchase and hold, or improve, it is important to purchase property that is attractive to prospective tenants.
Leave emotions out of it
It is human nature to get emotional, but it is important to remember to evaluate the invest property purchase differently to how you would look for your own home. Injecting emotion into the investment property buying process can lead to bad decision-making. Sometimes it is easier said than done to keep emotions in check.
Here is where a buyer’s agent or knowledgeable real estate professional is handy. They can conduct market research on investors’ behalf. Assessing a property to ensure it is situated in a desirable location with the potential for the highest rents is imperative when finding a profitable investment property.
Calculate expenses before purchasing
Using an investment property calculator is helpful when estimating expenses. Before sinking money into a property, do the maths to ensure it will meet your return on investment expectations. Calculations should include the purchase price, cost of any renovations, and monthly rent or annual holding cost.
Know your limits
With first-timers, it is advisable to ensure you know your limits and not to assume that cheaper properties are the best deal. Some properties may be inexpensive to obtain, but they also may not increase in value and be difficult to offload. Work with a financial advisor who can help determine what you can afford to borrow, then craft a purchasing strategy for properties and locations that could facilitate. Keep in mind that investment property tax deductions are available to help minimise your annual tax bill.
Expand your plan
Investors who purchase property with an existing dwelling may wish to consider expanding into a small development. This can include building a second domestic dwelling on the property or taking a larger property and subdividing it into smaller units. Investors who have the cash flow may even desire to purchase an entire block and building several new dwellings to increase their return.
Securing an Investment Property Loan
An important step in any property investment is securing a loan. Trilogy assists property investors establish the best finance strategy to match their investment plans. Contact us to schedule a no-obligation consultation about your investment property strategy.