Buying property for the first time can be overwhelming, with a lot to research and consider. However, buying an investment property can be a great strategy for younger people to get into the property market. So if you're just starting out, these tips may help you navigate the path to investing.
Firstly, you’ll need to set a budget. This is likely going to be the most expensive purchase you’ve ever made so far, so it’s important to organise your finances before jumping into anything. When building your portfolio, start slowly. And when it comes to estimating your home loan repayments, plan for higher interest rates. This way you can make sure you can still afford the repayments if the rates go up.
There are two types of costs to consider, upfront costs and ongoing costs.
Upfront costs include:
Ongoing costs include:
When you’re setting a budget as a first-time investor, make sure you don’t overcapitalise – this means not spending more than the property is worth if you were to sell it again. This brings us to the second point of making sure you’re buying the right property.
When it comes to choosing a property, think about what tenants want and what buyers will want in the future if you sell. We tend to find the big ones are built in wardrobes, adequate heating with the most popular option being a reverse cycle air-conditioner and off-street parking.
Try not to focus on looks when it comes to choosing a property and don’t get emotional about the process, you’re not going to be living here after all. A good location is probably the most important thing to achieve as this means a higher tenant demand and also better capital growth over time. Look for a property that is well-maintained and easy to keep that way, which may help avoid large out of pocket expenses.
Thirdly, minimise your risks. Buy local rather than looking interstate for your first property. Interstate markets can be a higher risk strategy because you often don't know those markets as well.
A building inspection can potentially save you thousands of dollars. The inspection will assess the condition if the property and usually include information on whether the faults can be repaired and how much they will cost. An overview of structural issues, insight into necessary repairs & identification of unsafe areas.
Make sure you don’t forget insurance, you should consider building, contents & landlord insurance. A good landlord insurance policy provides cover for tenant damage both accidental and malicious, loss of income if the tenant defaults or can’t pay for other reasons and damage from pets.
Finally, get help by considering talking to a buyer's agent & a property manager early.
If you want to invest but are feeling out of your depth, you could always enlist the help of a buyer's agent to help you find an ideal property. A buyer’s agent works exclusively for you and can save you time and money by helping you find the ideal home and negotiate the best terms. They can also remove emotion and stress from the buying process. Their local expertise will help you understand current market value.
Start speaking to a Property Manager before you decide on a property. We can let you know how a particular area is performing, give you advice on what tenants are looking for in a property and if we think anything needs to be done to a property to get it ready to rent. Also, it’s better to get an independent opinion on rental value rather than relying on what the sales agent tells you. Any good Property Manager should always be happy to provide an estimate on what any property will likely achieve in rent and this shouldn’t cost you anything either.
So if you are planning on making this the year you get serious about building wealth, then we hope this guide has been helpful to get you started on your property journey.