When it comes to building a retirement nest egg for the future, property is still viewed as one of the safest investments.
If you haven’t dipped your toe into property investment yet, you may be wondering how to get started, and there’s no doubt it can be a daunting process – but it doesn’t have to be!
Investors should first know their goals, and then the strategy can be worked out. While some investors may have the goal of buying a property to rent out straight away to earn regular rental income, others may wish to live in the property while they renovate it, with the goal of selling once complete.
Whatever your goals, investing in bricks and mortar can be a great way to create wealth.
Here are a few things to consider before diving into property investment:
Know your budget
It’s essential to have a thorough understanding of your cash flow. It’s a good idea to speak to a mortgage broker about pre-approval of your investment loan so you know how much you’re able to borrow before you start your property search.
If you’re planning on renovating, you’ll also need to factor in renovating costs including a buffer for any unexpected extras.
Research your area thoroughly
When finding a suitable property, make sure you have all the facts and figures needed to make a wise investment decision. This includes the demographic of the area, are there mostly renters? Are first homebuyers interested in this area? Depending on your investment goals, you’ll want to ensure your property will be well placed to attract renters or homebuyers.
Think about DIY if renovating
When it comes to plumbing and electrical, it’s necessary to get the professionals involved. However, paying tradespeople to renovate your entire property can be costly. If you can do certain aspects yourself, you will save money and increase your profit margin. Some examples of areas where you can safely get your hands dirty include:
- Removing old cabinetry
- Pulling out old plants and garden beds
- Planting new trees and plants
- Hanging new blinds and curtains
Don’t underestimate ongoing costs
Make sure your budget allows for rates, insurance and general maintenance and repairs.
Use your head, not your heart, when choosing a property
Remember that you are looking for a property that will either appeal to a large array of buyers or renters – not a property that you personally love! So think objectively, and look for the essentials that appeal to the broadest demographic.
Here are some features to look out for below.
- Plenty of storage
- Air conditioning and/or ceiling fans
- Low maintenance yard and garden
- Light and bright interior
- Open floor plan
Think carefully before negatively gearing
If the rental income you receive does not fully cover your loan repayments and costs, your property will be negatively geared. This can have tax advantages, but it will also lead to financial stress if you don’t have the cash flow to cover the shortfall. Investors who are seeking long-term capital growth in their investment often choose this strategy.
Do your due diligence
With any property purchase, it’s critical to do your due diligence. Before signing a purchase contract, make sure you organise for a building and pest inspection to be done, and thoroughly read through these reports to avoid expensive repairs later.
Don’t give up!
It can be a long process finding the right investment property, but it pays dividends in the long run and can set you up for greater financial independence down the track.
Finally, getting independent financial advice is important to make sure you are fully appreciating all the aspects of your investment.