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Five Steps to Buying an Investment Property

04.06.24 | Marc Barlow | Blog

Thinking about making the leap into owning an investment property? Whether you’ve just inherited money, been saving diligently or just want to use the equity in your own home, investing in property is a popular way for people to try to increase their wealth.

Here are five key steps to take before taking the plunge.

1. Clearly define your goals

Having a clear understanding of your goals is essential to selecting the appropriate investment. Unlike buying a property to live in, now is the moment to leave your feelings behind, because you won’t be living in this property – at least not for the foreseeable future – so you don’t need to have a personal connection. The property itself is not as important as the return it will provide and how well it will fit into your financial objectives.

Make a plan to achieve your end goal, which may be capital gains, cash flow, your own future home, or something else entirely. As your situation changes and the real estate market evolves, make sure your timeline remains reasonable and revisit your plan on a frequent basis.

2. Select your preferred kind of property.

You want an investment property to have great rental appeal, and also remain appealing to potential owner-occupiers down the track. Make sure you investigate the kinds of properties that tenants are grabbing hold of rapidly and those that appear to be sitting empty on the market.

Which should you choose: a renovator’s dream home or something that’s ready for the market? Do you purchase a home, a townhouse or an apartment? Your choice will likely dictate the type of renter you attract, from single-person rentals, share houses near universities, or family homes.

While buying a place you can rent out right away is usually preferable, don’t write off properties that just require small repairs. Higher rental returns over time may compensate for the money you spend up front on a new kitchen, clean carpets, updated heating or fresh paint work.

Keep an eye out for homes that stand out from the crowd with unique features like a second bathroom, a locked garage, or a spacious outside area. Such extras will make your house stand out from the competition when it comes to rentals.

3. Identify your exact location.

Are you buying an inner-city pad, a family home in the suburbs, or a regional property?

One of the main factors that will determine how well your home performs is its location, so you’ll need to focus your search to reduce the number of options. Once more, conduct research to find out which regions are doing well in the rental industry. Are real estate costs in the area rising? Keep your emotions in check: from an investing perspective, the suburbs that you might not want to live in yourself might be the most desired.

Consider the distance between the house and local commercial areas, cities or large towns. What’s the closest public transportation? Are you close to shops? The proximity to schools should be taken into account, since prospective tenants might have this as a top concern.

4. Organise your finances

Talk to a Mortgage Broker Group expert broker for free, unbiased guidance on obtaining loan pre-approval. Our brokers can help you:

  • Understand the difference between your projected rental returns and the loan repayments.
  • Make sure you understand exactly what your maximum purchase limit is, accounting for all additional expenses such as taxes, conveyancing, insurance, property management, and inspections.
  • Encourage you to maintain a safety net to cover for times when your property is unoccupied.
  • Understand how to arrange a purchase to maximise your rewards. For example, you can buy under your own name, with your superannuation fund, or through a trust, but it’s crucial to know how it will impact you and your family.
  • To make sure you’re making the best decisions, get professional help.

5. The Mortgage Broker Group difference

With our extensive background in mortgage broking, we can offer you guidance on a variety of property-related topics and connect you with other professionals that can help you make the best choices possible about real estate and investments.

It can be difficult to locate competent valuers, conveyancers, lawyers, accountants, real estate agents, and financial planners, but these professionals are the ones who work in the real estate industry and can guide you towards the finest decisions.

Let us help you get your finances in order, find the perfect place and get the best possible loan to suit your financial situation.

Contact us for as no-obligation chat about getting your investment portfolio up and running.