Will your next rental earn its keep?
Investing in property has the potential to pay off, but you need to ensure you can hold onto it for the long term without being overly burdened by the ownership costs.
The following steps will help you make a more informed and confident choice:
Run the numbers first
Start with the rent you can realistically expect to generate, then subtract more than the mortgage repayments. Allow for rates, insurance, property management, maintenance and any strata levies. Check whether you could cover higher repayments, unexpected repairs or a period without tenants.
Don’t forget to factor in upcoming changes to negative gearing, which will shortly only apply to residential properties purchased brand new.
If the budget only works when everything goes smoothly, take another look before stretching your finances too thin.
Think like a tenant
Rather than chasing a suburb everyone is talking about based on trends alone, consider what makes the property you have your eye on practical to live in. Look at access to shops, schools and transport, along with useful features such as parking. Investigate proposed planning changes nearby, too.
Ask yourself who the home would suit. Would a family have enough space? Could a commuter manage without a car? Consider its appeal to future buyers as well, rather than treating it purely as a source of rent.
Check beyond the open home
Look into recent sales of comparable properties before deciding how much to offer. An advertised price is a starting point, not proof of value.
While the open home is a great place to start, this is when the property looks and feels its best. You need to be thorough in your assessment and this requires more than a quick walk through. Arrange independent building and pest inspections, and read the reports carefully. Check what was inspected, what was inaccessible and whether further specialist advice is recommended.
Buying into a strata scheme? Have the records reviewed for building issues, planned works and available funds. Low levies are not necessarily a bargain if major repairs are approaching and insufficient money is set aside.
Get a local reality check
Before you make an offer, speak with a locally based property manager about likely rent, tenant demand and the property’s upkeep costs. Ask which comparable homes are leasing and whether anything about your shortlisted property could make finding tenants harder.
Use those answers alongside your financial and building advice. The aim is to buy with a clear understanding of the costs and compromises, not just enthusiasm for the property.
Discover More Articles
