Contract Considerations: What to Look For In An Investment Property

Not all Australians will experience the pride and joy of acquiring an investment property. In fact only 7.9% of Australians are likely to take advantage of available investment options. Plus, for those that are investors, if your peers and family are not in the market, you may be lacking a sounding board or mentor to direct you to the best tips and best practice. So, when it comes to closing in on an investment, here is what to look for.

The right location

When it comes to buying an investment property, you should only be considering suburbs of growth. Growth is relatively interpretative, so let’s drill down. You will get the best yield on an investment if you buy a property in a lower priced suburb that is in a growth period. Price aside, you should also be looking at historical data that would suggest the area is prone to flooding, and future data that suggests whether there is developments unfolding that may impact your property. It is important to remember that research does not mean the opinion of a friend or family member on the area in question – keep it fact only as the stats never lie.

The right price

The right price looks different for all investors. That magic number should be a culmination that derives from your deposit, income and future income. If you are using the same calculations that secured you your home, you may want to familiarise yourself with the laws in your state to avoid an unforeseen delay down the road. The benefits of saving a 20% or 30% deposit is that you will not need to pay mortgage insurance, which can add an unwelcome figure to your total loan. An investment is typically a medium to long-term investment, so make sure your cash flow will allow you to make mortgage payments for that duration.

The right bones

The old ‘fixer-upper’ has an undeniable charm. We all want to make our mark on something, and breathing life into an old home is a great project for anyone. What you don’t see on all those television shows is the money and grunt that goes into making a property sing, and just how many people cannot finish the project to completion.

One should never buy an investment property with the idea of sinking more money into it to make it sellable or liveable. A good rule of thumb is to look for properties that could start earning you money immediately if you needed to rent them out. Look for good bones and reliable structure so that you don’t have any expensive surprises around the corner.

The right plan

If you are considering an investment property, you are ahead of most Australians when it comes to setting up your future. But each investor has different plans for their investment, and it’s important to clarify yours. Many people treat their property as their super – a nest egg that secures them financial freedom down the line. For some younger couples, property management presents an opportunity to ready a home for their children when they are mature enough or even a coastal property that they can one day move to in years to come.

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Continue your investment property research, so that you can tap into the right opportunity when it presents itself. The best part of an investment property is that you are not looking for a place to live, so you can weigh up all the priorities before you dive into a decision.