Make Your Investment Property Work For You
Industry experts are predicting that more seasoned property investors are likely to start making purchases again this year as those who see property as a long-term investment recognise the current buying opportunities.
Bargains or not, making a profit on an investment property requires understanding and research and, often, a complete lack of emotion on the buyer’s part.
Here are some basics to consider if you are going to make the most of your second-home investment:
Find the property
Take into account that the location and style of the home you are looking for must suit your target tenant – will it be a one-bedroom flat in a student area, or a family house close to schools and parks? What makes it stand out as a good place for someone else to live in? Then think resale: if you had to sell in a few years, what would attract the next buyer? Will its style and layout hold its appreciation over the long term?
Find the neighbourhood
Even if the house is perfect, is the neighbourhood one that you see your tenants enjoying? Is it safe? Is it convenient and close to amenities? For example, if your target tenant is a student or young city dweller, chances are they would prefer to use public transport.
Find the cash
If you have a deposit or good equity in an existing property, and you can show the likelihood of rental income, you may be in better shape than you think when it comes to financing an investment property purchase. And although credit criteria has changed significantly over the past one-to-two years, there are some good, flexible investment loan options. Loan Market can assist you to determine your borrowing position and suitable investment loan products.
Find the manager
How your investment is to be managed is a major decision, and one that should be addressed early. Having tenants, short- or long-term, will require that the property be effectively managed, either yourself or through a property manager. Property management requires a range of skills and knowledge, as well as the time, so make sure you choose the management option that is most effective for your situation. If you do decide to use a property manager, management fees are tax deductible – Loan Market can assist you to find one.
Find the reserve
Property that will ultimately prove a good investment and yield a good rental return and capital growth over time, may still occasionally present its challenges. For example, you may experience a longer-than-expected vacancy when your tenant moves out, occasional rental arrears or even an untimely plumbing or electrical repair. You are responsible for meeting mortgage commitments and maintaining your property regardless of whether or not it is generating income. Before you invest, create and hold a cash reserve to cover those periods when the house is not rented, when the rent is late or when the toilet needs repair.