A new year often brings the sense of a fresh start.
And right now, that’s needed more than ever. If buying an investment property is on your to-do list for 2022, this essential five-step guide will get you started on the right foot.
1. Consider your motivation
When thinking about the various ways to invest, it’s important to understand your motivations. If you’re hoping for a fast return, then the property might not be for you.
The many rewards of property investment – including financial security and tax benefits – come from playing the long game. Once you’ve understood this, you can start looking at how you’re going to invest in property – rentvesting, for example, is becoming an increasingly popular option.
2. Check your finances
Let’s start simple: can you afford it?
If the answer’s yes, it’s time to talk to your bank about how much you can borrow and to arrange pre-approval of an investment loan. This will give you a firm idea of how much you can spend before you start searching for a property.
Beyond the sales price of your investment property, there are other important costs to factor in when working out your budget. These include:
- allowing for unexpected costs e.g. damage or urgent plumbing repairs
- ongoing maintenance costs
- council rates and any strata fees
- larger, one-off costs that might pop up, such as replacing the roof or fencing
- renovation costs to keep the property competitive in the rental market.
3. Do some research on property investment
Don’t know your tax depreciation from your transfer duty? Confused by negative gearing or capital gains tax?
Familiarising yourself with property investment terms will help you avoid potential problems and understand your obligations, and put you in the best position to maximise the benefits from your investment.
4. Do your homework on what to buy
In choosing where to invest, look at the numbers.
Find out the median rents in the suburbs you’re considering, whether they are rising or falling, and get up close and personal with the latest vacancy rates and rental yields for the area. What demographic of tenants typically rent in that area and what type of property are they looking for?
Here are some quick stats for our local area as we enter 2022:
- Waterloo: 58.47%
- Zetland: 52.59%
- Rosebery: 36.13%
Thinking of selling?
- Waterloo: 2.92%
- Zetland: 3.83%
- Rosebery: 2.98%
Median weekly rent
- Waterloo: $600 (units)
- Zetland: $600 (units)
- Rosebery: $570 (units)
Median rental yield
- Waterloo: 3.67% (units)
- Zetland: 3.46% (units)
- Rosebery: 3.57% (units)
While houses in these areas have a higher median weekly rent than apartments, the median rental yield is generally lower. Townhouses tend to fall somewhere between the two.
Do your homework across a range of suburbs, and also consider capital growth potential: whether the value of the property you’re thinking of buying is likely to increase over time.
Sydney’s inner city is always popular with tenants looking for a great lifestyle close to the city and other amenities. And Green Square is generating a lot of interest. One of Australia’s biggest urban renewal projects, Green Square is expected to house 70,000 residents once completed in 2036. The development will include a new school, outdoor spaces, shops and a new Sydney Metro station, and the potential here is getting property investors excited.
5. Factor in property management
New landlords can often be tempted to self-manage their investment property. But being a landlord isn’t a set-and-forget proposition.
Finding the right tenant – one who’ll treat your property well and stay put – is an art that involves knowing the best places to advertise for tenants, screening, checking credit scores, references and employment history, and more.
Good communication is also key. A professional property manager acts as an intermediary between landlord and tenant, and can often resolve problems long before they escalate.
Property managers also have a large network of maintenance professionals on hand and can guide landlords through their legal rights and obligations.
Good property management can make all the difference to your experience as a landlord as well as maximising the returns on your investment.
To discuss finding or managing your investment property, call my team today.