Thinking of purchasing an investment property? Like your own home, it’s a big decision, and you want to make a good one.
There are many things to consider when buying an investment property, and most people don’t plan correctly or do proper research. Don’t just jump in without first seeking advice from your accountant, bank manager or mortgage broker. Talking with trusted friends and family who are already investing can be helpful too.
Now, like any big purchase, it’s always a good idea to sit down and make a plan. We like to call it PIS – a Property Investment Strategy.
A PIS involves the following:
- Write your goals:
a. how much money do you want to make?
b. how long do you want to hold the property
c. why do you want to invest in property?
d. where do you want to buy?
e. what type of property do you want to buy – house, unit, duplex?
f. how many properties (if any) do you want to buy in the future?
- Do a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Be scrupulous in writing everything down. This will help you to ascertain any benefits versus risks, and also highlight any challenges you might face. You will need to research the area you are looking to invest in, including population growth, rental property demand, other demographics and suburb reports.
- Make a plan of how you will repay the property, how long it will take, and what your income will be. Does this match up with your goals above? Things to consider here include:
a. do you want to positive or negative gear the property?
b. do you intend to renovate/improve the property to increase its value?
c. know your initial purchasing costs, eg conveyancing, taxes, stamp duty.
d. know your ongoing costs, eg loan interest, land rates, insurance, property management fees.
e. know your rental income potential, and do your math, making assumptions for any maintenance or times when the property might be empty.
f. what is your exit strategy?
Having a Property Investment Strategy will not only keep your head clear through the craziness of the purchasing process, but it will help to keep you on track and be a guide when faced with key decision-making moments.
Talk to us at Beyond Property Management – we can help you with potential rental income and provide a rough guide to costs involved in property investment.