Getting an Investment Property

Investors will be looking at a slightly different set of priorities to an owner occupier. With an investment property your focus will be on maximising your rental return and capital growth, whilst making a sound financial investment for the long term.

1) Get Your Finances Ready

The first step in the investment property process is to work out how much you will be able to borrow and where / how you should be investing this money.

You may or may not already own your home with some equity built up in that property (the rule of thumb will be the more equity the better). Talk to our home loan team about getting pre-approved for an amount on your investment property. Your financial limitations are going to determine the type of property you can afford to invest in.

You’ll also need to be ready for the additional costs in the buying process beyond the property purchasing costs. There will be ongoing costs for your investment property such as council rates, agency management fees and repairs / maintenance. Also, don’t over-estimate the rental return and be realistic as you may be required to service the gap if the actual rent your receive does not match your forecast.

2) Select a Type of Investment Property

You can invest in residential, commercial or holiday market properties, although many investors choose residential investment. Once you've decide on the type of property, you will need to think about houses or apartments.

The benefit of an apartment is that a strata company manages the repairs and maintenance costs (and costs associated with repairs to the building) and these costs are usually divided between strata owners.

Alternatively, a house provides land value which can lead to greater capital growth, however it important to remember that the repairs and maintenance (especially on an older property) can be time consuming and costly.

3) Research the Area

You will need to give careful consideration to the area in which you are buying as both the area and the property itself will affect your capital growth prospects. Think about…

Demographics and Local Features

You should be looking for a strong local infrastructure which will support development and growth and think about the current and previous population statistics. A young, stable or growing population is ideal to ensure rental properties remain in demand with stable tenants. It is also helpful to to research any planned developments for the area (e.g. the Sydney Metro underground rail line was going to hamper short term growth in some Sydney suburbs during development period due to interruptions, but would have proven beneficial to values in the long term). Are there major employers in the area and are employees looking to be close by for ease of commute? Fringe areas to CBDs always have employees looking for rental accommodation.

• Current Rental Returns

  What you expect / need from a property and what the market will pay may be two different prices. Check real estate websites, local papers, and with local agents to get a real feel for the rental environment. Compare your target property against other similar properties to get a feel for the actual rental return. Go to some rental open houses to get a feel for potential tenants and demand.

• Prospects

  Will the area continue to be popular/ desirable? – Are there good transport links, a range of shops and adequate health services to support a growing population? Is there a range of major employers in the surrounding area and what is the state of the employment market? Locations in close proximity to water are always desirable.

4) Building Inspections

You will be responsible for repairs and other maintenance so make sure you get a proper inspection and plan for any outgoings in advance. You will need to assume a portion of the rental income will be spent on maintenance and repairs.

5) Good Deals Help

There should be very little emotional attachment in the investment property process (as compared to the emotional attachment when buying your own home).

Be comfortable in driving a hard deal to get a good price. The better the price, the better then overall return on capital growth. It is OK to miss out on expensive properties as an investment property is a business decision which needs to make a return for the investor. Treat it as business and try and secure a good deal by making lots of low price offers to try and get that good deal.