Purchasing an investment property continues to be one of the most popular ways to invest. An investment property’s goal should be to increase your wealth and secure your financial future. There is however, a common misconception that real estate investing always delivers positive returns. This can be true a majority of the time for experts like Than Merrill of FortuneBuilders who really know what they’re doing, but it’s not always the case. You need to be mindful of how effectively you’re managing your investment as this will determine whether the investment will assist you in reaching your financial targets. The cost of owning an investment property is manageable – especially after you take into consideration the rental income and tax deductions you’ll be entitled to.
We asked a leading property developer specializing in house and land packages in Sydney for their generic tips on buying investment properties. Here’s what they had to say.
Note: We advise you seek individual financial advice from reputable, trusted financial and property specialists to ensure investment solutions are tailored to your needs and objectives.
Choose The Right Property At A Fair Price
Investing in real estate is often about capital growth, so choosing a property that’s more likely to increase in value is the most important decision you’ll face so purchasing a property at a fair price is crucial for this goal. Unlike investment shares where the value of a company is transparent, real estate is definitely more challenging to determine it’s worth. This however provides an opportunity for you to acquire an asset below its real market value if you are patient and well informed. The key is to do your research, work out what other properties are selling for in and around the area and then you’ll soon become a pro at ascertaining what a property is really valued at meaning – you’ll know a fantastic bargain when you see it!
Don’t Buy Where You Don’t Know Anything About The Location
Steer away from considering purchasing real estate in an area that you’re unfamiliar with, particularly when you are approached by real estate companies marketing interstate or offshore properties. If you do find a property that you like but are unsure of its real value, we’d suggest arranging for an independent valuation to be carried out on behalf of a bank. Once you’ve received this information, you can use this as a solid negotiating tool.
Access Additional Property Data
You probably aren’t aware that trusted property publishers, lenders and mortgage insurers have valuable data and intel pertaining to various locations and property developments. Try and access this information to assist you in choosing the right investment property for you.
Purchase Property For The Right Reasons
Whatever you do, don’t make a decision to purchase an investment property based on getting a tax deduction! Instead focus on making the right investment choice for ideally, long term benefits.
Knowing exactly why you are purchasing a property is just as important as how to buy it. For instance, lots of people tend to buy investment properties that appreciate in value and therefore increase in capital gains. Others view purchasing an investment property as a way to generate additional income through rental yield, but whatever strategy you decide on, make sure it aligns with your overall financial goals.
Real Estate Investment Income Streams
Certifying that you have a continual rental income stream is vital as this cash flow will make the holding of the asset more affordable for you and provide you with an income.
- Different residential properties such as apartments, units, houses and land can often outperform each other over time. For example, vacant land won’t provide an immediate rental income however it might appreciate quicker if purchased in an area with limited supply.
- Investing in a unit or apartment might mean less maintenance costs versus investing in a freestanding weatherboard house. Some areas offer higher rental yields too, but it is important that you do your homework because often these properties provide lower capital growth opportunities.
- It’s also imperative that your property suits the demographics of renters in the area. For example, if it’s near a university, additional bedrooms will be in greater demand instead of a big backyard that needs garden maintenance. A family home that is close to schools and parks on a quiet street will be more desirable than a property on a busy road.