Checklist for Purchasing an Investment Property in Australia

In Uncategorized by Jeff OsborneLeave a Comment

Tips for buying an investment property in Australia...

Research and planning can play a big part in the success of your property investment. Here are some tips to help you get the ball rolling.

1. Think about your goals

It’s a good idea to consider the realities of the property investment alongside its potential benefits. Think about why you’re investing in the first place, and whether it fits with your particular set of circumstances – this will also help to guide your next steps.

2. Get some Help

Sitting down with an experienced  local property investment expert will help clarify your options. For example, whether you’re looking for an apartment or a house, to suitable suburbs and how much you can afford to borrow with an investment loan (see point 3).

It’s also a good idea to decide whether you’re buying to make an income now, or as a longer-term investment. Then your adviser can research the property selections for capital growth, rental income and ongoing costs.

3. Set a budget within your means

Lenders will generally ask for a minimum deposit of between 10% and 20%. However, the deposit can come from equity in your home and which can be released through refinancing. You’ll also need enough upfront cash for things such as stamp duty, legal and conveyancing fees.

Also consider how the repayments on your borrowings could impact expanding your portfolio. Many Australians have variable interest rate loans, however, most investors use interest-only loans that reduces repayments and enables easier "serviceability" to qualify for more property investment purchases.

This is where a Broker can be invaluable in assisting with finding the best finance and representing you to the chosen lender.

4. Decide who’ll manage the property

To ensure effective supervision of your property and that rental payments are on time, you might want to appoint a property manager or real estate agent. Keep in mind that this service will incur property management fees.

5. Consider whether you need insurance

Acts of nature, building repairs, contents, and loss of rental income are some of the things to think about. The type of cover and the premiums you’ll pay can vary greatly depending on the provider and the policy you take out. Landlord insurance can also cover you for damage caused by rogue tenants but is obviously more expensive.

6. Budget for the little things

It’s not just the deposit you need to consider when saving to buy an investment property. You may want to do some renovations before you rent out your property, and you’ll also need to budget for ongoing property costs such as:
• council rates
• water rates
• strata fees
• repairs and maintenance
• property management fees
• estimated vacancy costs, including lost rent and advertising
• insurance, such as landlords’ insurance
• other charges, such as land tax.

But unlike the home you may live in, these costs are tax deductible.

Your property investment adviser should be able to provide these budgetary costs for the property and provide an investment analysis showing the likely cash flow situation.

So whether you are focused on maximising rental return (yield) of captial growth, you will have a budget and a forecast to work with.

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