Investment properties are a fantastic vehicle to creating wealth for your future, but it’s important to remember these rules:
Leave your emotions at the door
You should always be looking to buy an investment based on the facts of the property, not let your emotions weigh into the decision. Too many mum & dad investors get caught up in what colour the carpets are, the type of curtains in the kitchen etc.
When buying an investment property it is imperative to base your decision purely on the numbers. If the numbers work, then you have yourself a deal.
Do your research
Would you purchase shares on the stock exchange (valued in the 100’s of thousands) without knowing the companies past performance, future opportunities and income earning potential?
So before buying an investment property do some thorough research, here are a few things to look our for:
- Property growth values in your region.
- Potential to easily increase the value of your investment.
- Look at rental values in the area you are looking to purchase.
- It is important to keep in mind that you may not be able to keep your property rented out for the entire year – so when working out the annual return make sure you account for a month or so of no income.
- What are the costs associated with the property? E.g. council rates, strata-title levies, water, other costs (e.g. annual maintenance)
Determine how you are going to purchase the investment
Will the money come from savings or will you have to borrow? If so, how much will you have to borrow? How much will the repayments be?
You should always want to maximise your investment debt and reduce your personal debt first! Why? Because you're getting good tax benefits by having the investment debt, whereas you are not benefiting at all from your personal debt. (Want us to explain that further? Just send us a message and we would be happy to have a chat!)
Once you’ve followed these basic rules, you will be in a much better position to make a decision about your investment property and you’ll have a greater chance of getting the results you desire.
Want to know more?
Chat to one of our Money Coaches today for a no obligation strategy session for your personal finances – what have you got to lose? Call 1800 882 981 or click the button below to email us.