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What to consider when buying an investment property

Keen to get into the property market as an investor? Before you start looking, you need to understand that what you’re looking for in a house to occupy may be different to an investment property.

When hunting for an investment property you’re going to be thinking about the rental yield of the property and whether this would be an asset to your investment portfolio, rather than looking for features specific to your needs; like commute times or how much you like the kitchen.

Understand your costs
There are additional costs that come with an investment property. Along with mortgage payments, body corporate fees, council rates, insurance and other property upkeep costs, you may also have property management fees. Build a clear picture of your total outlay and ongoing costs when assessing the investment value of a property.

Do your homework
As well as your own research, it’s important to have building reports, valuations and appraisals carried out before deciding whether to purchase the property. Remember, the market and bank valuations may vary. This is generally because the bank, aka your mortgage provider, will look to minimise its risk.

In your property research, find out what’s planned for the surrounding area. Make sure you know about any proposed developments or zoning changes - these could have a significant impact on the property value. The local council is your first stop to finding what planning applications have been lodged.

Buying a ‘fixer-upper’
Be realistic about how much work the property might need. As an owner-occupier, you may be able to live in the chaos of a renovation but renovating a rental property could see a significant rental income loss and a large time commitment.

Consider a tenanted property
Don’t discount properties with existing tenants. A property that’s already happily tenanted can be a valuable option - you won’t lose rental income while looking for tenants and you may save on property management fees.

Look into tax implications
‘Ring fencing’ of residential rental losses legislation has come into effect so if you are expecting to make a loss, come to us first to discuss the best structure to invest through. If you are expecting your rental to make a profit, then most likely a different structure will be appropriate.

Talk to us before you buy so we can help with your property investment.

Chris Lamb
PKF Rutherfords Ltd

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