After many years in the business, there are some things that don’t change when it comes to choosing the right investment property. I’m hoping that you’ve seen these all before, and this is just a reminder list for you.
- Buying in the same area you live in is often preferable, especially for a new investor, as it is easier to keep an eye on the property. Driving past the property regularly will help you stay on top of any potential problems, and relieve any new-investor anxiety.
- Three or four bedroom homes are usually easier to rent and normally have a quicker chance of re-sale should you need to sell any time in the future.
- Low maintenance cladding materials on the exterior of the home will help to reduce ongoing maintenance costs. Maintenance is not something you should take lightly.
- Double income properties, for example homes with a granny flat, often offer excellent rental yields. If you lease these at different times, then you won’t be down double income if both are vacant.
- The location of the property tends to be more important than whether the property is a house or a flat.
- Properties down a right of way are difficult to inspect from the road.
- Look for properties that have an X factor. Can it be extended? Is it sub-divisible? Is its location superior? Look to the future as to what you could do with the property.
- Organise your finance before signing an agreement to minimise the conditions applicable. So many people forget to do this.
- Attach the cheque for the deposit to the agreement so that it is staring the vendor in the face when the agreement is presented. (Even if you prefer to handle money digitally).
- Set yield criteria for your property purchase. Try to achieve a rental yield higher than the rate of interest.
- Develop a relationship with your Mortgage Broker and Buyers Agent. They will save you time and money. Speak to them regularly about your future investment plans.
- Fixed interest rates reduce risk. Floating interest rates create flexibility. You need to know what works for you.
- Keep accurate, complete and tidy tax records. Highly important!
- Spread your investments. Target some properties with high yields and low potential for growth, and also target properties with lower yields and a higher potential for growth. A balanced portfolio is always a good idea. Make sure you follow a plan so you know what sort of property you will be buying next ad why it will work for you.
- Make your investment property loan interest only if you still have a mortgage on your home. Make all the principal repayments on your home loan, as this is not deductible. Make sure you work with your accountant and financial planner when doing this, to make sure it is the right thing to do.
- Use an accountant for your tax work!
- Keep a long term view.
- Always maximise your depreciation claims by having your chattels valued regularly.
- Be nice to your tenants. They will be nice to you in return.
- Always respond quickly to a tenant request.
- Review your rental rates, both up and down, according to the market. Work with your Property Manager to help you with this.
Talk to your Property Management Company. They have the market information and experience to help you to make the right decision for your investment.