Purchasing an investment property is not quite the same as buying a home you are going to live in yourself. For a start, you need to look at your numbers differently as, unlike a family home, an investment property is supposed to generate a level of income, whether this comes from the rent paid by a tenant or the capital growth you intend to realise at some point in the future. Most new investors choose to have an agent like Templeton Property manage their asset for them. This is particularly useful if you live some distance away from your investment property. For more information on investment property management, see here. You’ll also find a few tips below on what to look for when you decide it’s time to buy your investment property.
Value for Money
Making sure you buy well is the golden rule of entering into any investment deal. The best way to assure yourself of this is to do your homework. This means checking out past, current, and predicted sale prices for the area in which you wish to invest. It’s a good idea to spend a little on professional reports, and target areas which are trending upwards but which do not appear to have yet peaked. This can be difficult to predict for a novice investor, so don’t be afraid to engage some industry experts. It can cost you some dollars, but better a few hundred spent upfront that hundreds of thousands lost at the back end of your property deal.
Hidden Costs
It doesn’t pay to leave potential costs out of your calculations when you’re considering buying an investment property. Remember to look into a landlord’s insurance premiums and to factor in a vacancy rate. A vacancy rate is the percentage of the year that your investment property may not be leased. This is important to know because certain running costs do not abate just because the property is untenanted. You, as the owner, still have to pay council rates, land tax, insurance premiums, and possibly strata levies and some sort of water usage, depending on how this kind of cost is structured and what kind of property you own. Local property experts should be able to give you an idea of what the vacancy rate in the area could be. It is likely to be higher for commercial real estate than for residential.
Hassle-Free Property Management
Unless you intend to manage your investment property yourself, it’s worth taking the time to find a property manager who can manage your asset well. A property manager who calls you for every little thing is not doing their job. They are paid to take care of your asset, rent it to the best possible tenant for the best possible rate, and to keep checking in with the tenant and with you to ensure the arrangement keeps working for all those concerned. Look for a property manager with experience and ask around in the local area. Look at other properties they manage and see what state they are in. Are their tenants mowing their lawns? Do any have garbage on the front porch? You may not wish to engage managers who let their tenants get away with treating their rental property in this way.
When you buy a home for yourself, you may not look beyond the resale value, but an investment property is a little bit different. There are management issues to consider because you will not be at the site all the time.
What are the top three things you take into consideration when you’re looking for an investment property? Share your insights in the comments below.