Property investment can be one of the most rewarding assets with a strong capital growth and is one of the more popular forms of investment. While the initial and ongoing outlay can be costly, investing in the right areas with robust rental yields can prove rewarding in providing a passive income.
Work out your ‘why’
Before choosing to invest in property, work out the reasons why you would like to diversify into this type of asset and if it’s the right path for you. Property investment, unlike buying your own home should be more strategic in the approach with less of an emotional connection.
Is it an investment that you would like over the short term with a good rental return, in the medium term to kick start a wealth creation focus or longer-term while planning for retirement? All of these factors may impact the suburbs that you look to invest in and the type of property that you are after.
Work out your budget
Similar to purchasing your own home, there are requirements that you will need to meet to ensure that you can finance an investment property. Financial lenders may take any equity over your own home into account when considering how much you can borrow for an investment.
They will also weigh up the risk factors around your history and expenses that may be required for the property including rates, levies, any capital works, and maintenance.
Lenders will also consider the location that you are looking to buy in and current and forecast capital growth in the area and potential income that may come from the property to determine if the rent will cover expenses or if a portion of your income will need to cover the mortgage repayments and other expenses.
Work out your location and property type
Once you have your why and finance in check, then you can consider the location and the type of property that you are after for investment.
It is important to work out if you would like to invest in a house, townhouse, unit, or another style of property as each has different levels of obligations when it comes to regular maintenance and general upkeep. Additionally, it's important to weigh up the potential capital growth of your property against the rental yields. A lot of investors fall into the trap of exclusively chasing rental yields often at the expense of stronger capital growth in their property simply because the rental returns are better in the short term. This could be a costly mistake as the greater capital growth over time often happens in more expensive properties in more upmarket blue chip locations that are more accessible to important infrastructure, i.e transport, schools, hospital, town centres etc...
If you choose to invest in apartments, strata levies and responsibilities need to be considered and if a strata complex has a pool, lift access or landscaped gardens, all of these are factored into the strata levies and can increase your costs each quarter, especially if capital works need to be carried out.
All property styles will have regular maintenance and upkeep that is required and depending on the age of the home, will determine how soon that needs to be done. You should consider setting aside funds each month to cover for when things go wrong like leaking taps and toilets as well as future refurbishments like paint, carpet, blinds kitchens and bathrooms.
An experienced Property Manager can help to take the pressure points off the day-to-day running of your investment property and provide expert advice to maximise your investment.
Talk to the Meridien Realty property management team on how they can help to find solutions for you to make owning an investment property seamless.
* This information is general in nature and not intended to be financial advice.
* Reach out to myself or my team at Meridien Realty for the best real estate assistance and expert advice on what’s happening in your local market. Whether you’re looking for a top selling agent or professional property managers to rent your property you can rest assured we’ve got you covered with the best advice.