Property Investment

Investing in property is generally viewed as a fairly safe method of investing that yields good returns on your money, even in times of a drop in the market, as with the recent global financial crisis.

 

Whilst it is an investment strategy that almost anyone with money to invest, can enter, there are several things that you should consider before signing a real estate sale contract. The following 12 tips should help you on your way to building your own property empire:

 

1. Determine your budget: how much money do you have that can be used as a deposit? How much money can you afford to pay each month on loan repayments? This, along with your personal financial details will determine how much the bank will be willing to loan you.

 

Be realistic and do not over commit. If you enjoy a full social life, or if you enjoy regular overseas holidays, factor these into your budget;

 

2. Allocate your funds: you now know how much funds you have available. Now you need to determine how much you can spend on a house.

 

The purchase of property attracts a number of mandatory fees, including stamp duty, service fees such as Council rates, water rates, emergency services levy etc, mortgage fees and conveyancing fees. A Selling Agent, Conveyance, or your bank should be able to provide you with some indicative costs for you to work with, although these will vary from property to property and State to State.

 

It is also a good idea to keep between $5,000 - $10,000 aside for any unseen costs, or emergencies. Whilst the initial inspections of a potential property may not indicate any possible issues, such problems as a broken hot water service, termites, or leaky plumbing can easily and quickly become evident;

 

3. Do your homework: now you know how much you have to spend on a home, investigate what type of home you will get for your money and in what locations. For example, homes closer to a city are generally more expensive than those a little further out. Two storey homes are generally more expensive than single storey homes.

 

Look at the types of properties that are popular in your affordable areas. Do you intend to rent out the home? If so, what times of homes rent easier. For example, in a community full of young families, a three bedroom home with a reasonable back garden is more likely to rent easier than say a two bedroom unit in a unit complex. Do you intend to renovate the home and resell? Again, look at what types of home sell quicker in your affordable areas;

 

4. Look for features: look for features that add value to the property, such as a secure entrance, proximity to transport, schools and shops, off street parking, the size of the garden, entertaining area, or balconies etc;

 

5. Be specific: buying property can be exciting and it is easy to get swept up with the fancy talk of the Sales Agent. However, do not settle for a peroperty that does not suit your budget, or your requirements. Although you may feel the need to "settle" for a property, patience is a virtue and you will find that the right type of property will come onto the market sooner, or later;

 

6. Get to know local Agents: often good properties move fast, with never reaching the public market place. Get to know a few of your local Real Estate Agents and let them know that you are genuine about purchasing a home in a specific area. When a property matching your description makes their books, the Agents are more likely to ring you before they offer it for sale on the open market.

 

7. Consider rentals: rent out your newly purchased property can create an income to help you pay for the mortgage and it can have plenty of tax advantages. Such things as repairs to the property, property management fees, loan repayments and interest costs can all be tax deductable.

 

However, you must never rely on your rental income to pay for the mortgage. There may be times when, for whatever reason, your rental property is vacant, attracting no income at all. You need to be prepared for these times and have the funds readily available to continue to meet the expenses of the property, such as the mortgage repayments, Council rates, insurance etc.

 

If you do decide to rent, it is a good idea to take out Landlords Insurance. It is not often that a tenant will damage a property, but it can happen. In such circumstances and depending of the amount of damage, it is highly unlikely that you will have the funds available, or will even want to pay for the damages out of your own funds.

 

8. Consider renovating: you may be the adventurous type and enjoy big projects and hard work. Renovating a home for resale may suit you. Before purchasing a property to renovate, consider your renovation budget, how much have you got available to spend? Consider what renovation work you can do yourself and what work you will need to get professionally done ie: electrical, plumbing etc. With a plan in place, this will help you to determine what type of property will make a good reno.

 

Note: structural changes to a home can be not only costly and extensive, but can also lead to all sorts of unforeseen problems and dangers. It is highly recommended that structural changes not be considered, unless you are a qualified builder;

 

9. Have a sales plan: when selling your rental property, or newly renovated home, have a sales plan in mind. Whilst it is your Selling Agent that will do the work, he/she is working on your behalf.

 

Such things to consider include how much do you want to spend on advertising? A lot of money can and is usually lost on inappropriate or over advertising expenses. Where will your property be most viewed, leading to a sale? ie: on the internet, in your loal paper, in the city paper, from flyers at other open homes etc. When is a good time to sell? Not many properties sell over the Christmas period. Beach front homes tend to sell slower over the winter months and quicker in the summer months.

 

10. Present your home for sale: when preparing your property for sale, you need to make it as attractive as possible to potential buyers. This does not mean lots of work, or expense, but it may require some time and elbow grease. Simple things such as a new letterbox and house number, a coat of paint on the gate, weeding the gardens and mowing the lawns, washing the curtains etc can all make the world of difference.

 

Furnished homes always sell easier than vacant ones, as curtains, furnishings and lighting make a property more welcoming and homely. Vacant properties can appear to be smaller than they really are, cold and bare, even if that is not the case. If you do not have any spare furniture, there are companies from which you can hire furniture and electricals to fill those empty rooms;

 

11. Remember insurance: whether you intend to do a short term renovation and resale, or a longer term rental, insurance is a must! There are several types of insurance available to suit property developers and landlords that cover everything from building and contents to accidental damage and loss of rent.

 

Do not under insure to save money either. In the unlikely event that the home is damaged, flooded, or burnt to the ground, you will be glad that you insured properly. Besides, insurance premiums can be a tax deduction;

 

12. Final Important Tip: unless you desperately want a property, be prepared to walk away rather than pay top dollar, as there will always be another good investment not far off.

 

Don't get emotionally attached to a property, or the idea of a new property. Property investment is business and should be treated as business. This enables you to make decisions and take actions with much more ease and less stress. Once you become emotionally attached, your judgement becomes clouded and your thinking is not clear. This is where you can make costly mistakes;

 

 

Buying and selling property can be exciting and rewarding, but you need to do your homework, be financially prepared and do not take too big a risk.

 

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