Buying your first investment property is a huge step. So it’s worth taking time to do your research rather than rushing in.
There will always be an element of risk when it comes to property investment. But if you get it right it’s a great way to achieve financial security. Here are five mistakes to avoid:
Not doing enough research around property and suburb selection
As with your own home, when it comes to buying an investment property, location is key. Do as much research as you can into property trends and forecasts. And keep an eye on upcoming infrastructure such as public transport and facilities, including new schools and hospitals.
People want to live where there are shops, entertainment and public transport. If these fundamentals aren’t there, keep looking. Yes, the suburb may take off eventually, but until then you still need someone paying the rent.
Listening to the media hype around property investment
Booms and busts are part of the property cycle. Seasoned investors will learn to ignore the latest gloomy headline or hyped-up new suburb. Property investing is a long-term strategy to make steady gains, not an instant get-rich scheme, unless you are extraordinarily lucky.
By all means keep up with the latest news and exciting properties coming on the market in your area. However, don’t panic buy for fear of missing out, or panic sell because the evening news says there’s going to be a crash.
Not doing the numbers
Always seek financial advice when starting out in property investment, and crunch your numbers carefully. It’s essential to have a plan and not rush into the first loan you are offered or the first property you see.
Don’t feel that you have to borrow the maximum amount or stretch yourself financially. You can buy an investment property without impacting on your monthly budget if you choose carefully and start with a modest investment. Smart investors will use a mix of borrowing, equity or savings, and cash flow from the rental property itself, to finance their investment.
Not considering your tenant’s lifestyle
Just because a new suburb or development is being hyped, it doesn’t mean it’s necessarily a good investment. This is particularly true if it’s not in a good location.
While you may get a bigger property further out, it may end up making more sense to find something smaller and more urban to give people access to a better lifestyle.
You need a place tenants will want to live in, and you need to attract the kinds of tenants who will pay you rent on time so your costs are covered. The most basic apartment will find a tenant if it’s in a great spot, close to transport, parks and other attractions. Location is (almost) everything!
Not buying the right property
While location is a driving factor, asset selection is also critical. Look carefully at the property and at factors such as how many owner-occupiers are living there, its condition, its street appeal, its layout and so on. We’ve written more about choosing a good investment apartment.
While you might fall in love with your own home, an investment property requires you to be much more practical and not let your emotions rule your head. Plus, of course, your bank needs to be willing to lend on it, which will also drive your decision making.
Talk to us
If you’re looking for your very own Sydney apartment to start your investment property portfolio, give us a call. We have some ideal properties on our books for the first-time investor, and unsurpassed knowledge on the Sydney inner-city market. And now is a great time to buy!