What to consider when purchasing an Investment Property

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At Westlawn, we have a team of specialist Home Loan Brokers who love to help locals achieve their investment property goals.

Purchasing an investment property is a great long-term strategy to build your wealth.

In this article, we’ve put together a few tips to help you get started on your journey to purchasing an investment property and get the most out of your investment.

 

First Step: Set a clear budget and know your costs

An important first step, when purchasing an investment property, is to find out how much money you can borrow. How much will you need for the deposit you will need? Can you afford to service the loan if your rental payments don’t cover the mortgage? Talking to one of our brokers at the start of the process will help you to establish what your budget is for a property.

You will also need to factor in other purchase costs and the ongoing costs of owning an investment property, such as:

  • Stamp duty
  • Legal fees, conveyancing
  • Mortgage insurance
  • Landlord and property insurance
  • Maintenance or renovation costs
  • Council and water rates
  • Strata fees
  • Property management fees

Once you have a good idea of these additional costs, you can work out how much rental income you need to achieve to cover these costs. How much will you need to chip in regularly if the rent doesn’t cover everything? Let us help with this first step – talk to a Westlawn expert.

There can also be tax implications and tax benefits for your investment.  So it’s a great idea to talk to a tax accountant who can help forecast your tax obligations – leaving no nasty surprises when tax time rolls around.

 

Get a Pre-purchase Inspection

As with any house purchase, you should always get a pre-purchase inspection from a qualified building inspector, and a termite report. This will flag any potential issues with the property, such as

  • structural issues and defects,
  • maintenance work that needs to be done,
  • mould,
  • asbestos, and
  • termite damage or pest issues.

If any potential problems are identified, don’t forget to adjust your budget to accommodate for repairs and upgrades.  Making improvements to the property may increase the value of the property and potentially increase your rental income. Talk to a Westlawn expert about starting your property investment journey.

 

Consider your tenant

When you buy a rental property, you need to put yourself in the shoes of the tenant. Consider what they might be looking for in a location – does it have easy access to shops, cafes, parks, schools and public transport? Does the area have a low crime rate? Is the neighbourhood attractive?

In terms of the property, consider what features might be appealing to a tenant, such as a neutral colour palette, a lock-up garage, a lift if the property is within a complex, good security, low maintenance gardens etc.  Also, consider if you will allow pets.  These are just some of the things that a renter might be thinking about when they are choosing a home.

Think, also, about the demographics of the local area that your investment property will be in. Is it an area with families, young people, a transient population or lots of long term residents? Consider whether the population will offer a stable, regular flow of potential tenants. Have you found a great potential rental property? Talk to us about getting started on your purchase.

 

Research the market

Buying in the right location at the right price is important to your long-term investment goals, as the goal is to achieve capital growth in the long term. It’s a good idea to check the historical sales data of the area you looking to invest in to see if there has been steady long-term growth. Also, consider the proximity to the CBD, and the property type, for example, a house vs an apartment. An apartment might give you higher returns, as they generally cost less to maintain.

You also want to ensure that you can rent the property with ease and at the right price. Research what the current rental rates are for the area and if these are likely to rise or fall base on the vacancy rates. Having some familiarity with the suburb/region that you are buying in helps in choosing the right property. This might be some insights into future plans for the area such as new land releases or zoning changes, new commercial districts or developer interest, rental turnover or vacancy rates. As well as researching the market, talk to a Westlawn Home Loan Broker about your financing options.

 

Invest in a property manager

Paying to have a property manager look after your rental property can make the whole process less stressful.

They will take care of advertising and finding a great tenant for you – something which can be a daunting and time-consuming process. They will also do regular inspections to make sure the property is kept up to standard, collect rent on time, and deal with any maintenance issues that arise. A property manager will ensure all tenancy laws are adhered to, saving you the hassle of any legal issues.

Talk to an expert

Contact your local Westlawn branch or
find out more about how to get our lowest home loan rates here!

General advice warning
The information provided on this webpage is intended to provide general information only and the information has been prepared without taking into account any particular person’s objectives, financial situation or needs. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs.
Westlawn Finance Limited ABN 19 096 725 218 Australian Credit Licence No. 387844
AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001.

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