Investing in Property
Property investment is one of the main ways Australians build wealth. It’s the great Australian dream to build a property portfolio, right?
When it comes to investing in property, it’s easy to let your emotions rule. Before you make any snap decisions, you should consider the benefits and risks associated with this type of purchase.
Purchasing a property for investment purposes can involve a different set of considerations compared to purchasing a home to live in. Here are some tips to get you started.
Our most commonly asked property questions
Investment Zone specialises in maximising client wealth in the Brisbane area and beyond. This includes providing direct property advice to our clients. Here are some of our most commonly asked questions we receive from clients (FAQs)
"Is buying an investment property in Brisbane a good idea?
"What is the difference between a negatively geared property and a positively geared property?
"What's happening in the QLD property market?"
"What is involved in buying an investment property in Brisbane?"
"Is it a good time to buy an investment property?"
"Is buying property a good investment strategy?"
What's the best rental market for property investment?
First, decide if your property will cater for the budget rental market, mid-level rentals or the executive market, or holiday rental market. While the “executive” end of the rental market provides very good returns, it may not be suitable for the average investor.
The market for high-rent properties is more fickle and hence you could find yourself without a tenant for a considerable period and no cash flow to meet mortgage repayments. At the budget-end you are more likely to encounter higher tenant turnover.
For holiday rentals, the occupancy rates will fluctuate and if you rely on income from peak holiday seasons, you won’t be able to use your holiday home during these times. i.e. school holidays. In addition, you might get bored visiting the same place over and over; or you may even feel guilty if you holiday somewhere else!
What type of tenant should you target?
Consider the type of tenant you intend to target. Are you looking for young couples with no children or will you focus on the family market? Units are good for business couples, while the typical house and garden is more suitable for families.
To minimise tenancy turnover and appeal to the higher calibre tenant, the property should be finished and presented to a standard that is more applicable to an owner-occupier.
A relatively new or recently refurbished property, well decorated, with good quality fixtures and fittings is important to secure the right tenant who will stay for the longer term. Skimp on quality and you may end up paying more on regular maintenance and replacements.
Location, location, location!
Once you have determined the type of property, the next step is location. A more attractive rental property will be close to public transport and good road systems. If your rental is family-focused you need to be sure it is close to schools, childcare facilities and sporting amenities.
Consider if there are places of employment in the close vicinity, such as industrial or commercial centres, attracting substantial numbers of employees – and potential tenants. What is the level of rental vacancies in the selected district?
For long-term capital growth seek an area with high trends in population growth. Take time to study which areas are proving popular and where local authorities are developing infrastructure.
For holiday rentals, strong demand for holiday homes is on average around 8-10 weeks per year – and this is dependent on location. Demand for homes in a warmer climate is more consistent.
Should you use an agent or DIY property management?
Happy, contented tenants will look after your property, so good property management is essential. If you intend to do this yourself, be sure you are contactable 24/7 in the event of emergencies and have a list of tradespeople you can call for plumbing, electrical or building repairs. If you intend to use a property agent, check their background, experience and current management procedures. And shop around.
I'm thinking about buying an investment property and want professional advice
That’s a question we often get asked. Here at Investment Zone, Senior Financial Planner Brad Macaulay can assess your property position as part of a big picture analysis and overall wealth creation strategy.
Remember, to improve your chances of profit, property should be considered a long-term investment. With this in mind, it is worth putting in the extra legwork before you buy to help make a good investment decision.
Information is power, so take a look at these other information sources.
All about buying and managing an investment property - https://moneysmart.gov.au/property-investment
We love this report from Domain – “The ultimate guide to property investing” - https://www.domain.com.au/advice/investing