6 commonly asked questions about buying an investment property
With many renters I know looking to enter the property market but realistically unable to afford their dream home right now, I’m finding many of you want to know more about investment properties.
What are your most pressing questions? What are the benefits of buying an investment? And what should you look out for? Let’s take a look at the 6 most commonly asked questions about buying an investment property to find out whether this is the right decision for you.
Why buy an investment property?
As a renter (or even a current home owner), you may be wondering, “what’s the point of owning an investment property? Won’t it just put me out of pocket?”
The main reason people buy investment properties is to set themselves up with financial security in the future. While you might have a high-paying job and racking up the superannuation, wouldn’t it be nice to have a little more money to fall back on when you retire?
With interest rates on the rise, is now a bad time to buy?
This one’s a mixed bag. While some property experts advise renters to hold off from buying an investment property while the interest rates continue to climb, others believe the current spike in interest rates suggests the markets will calm down in the near future.
So who’s advice do you take?
I strongly suggest considering your overall strategy and long-term goals. While interest rates shouldn’t be your one and only deciding factor, it would be best to speak to a Financial Advisor and Mortgage Broker before taking the leap into property investment.
If you do decide to buy, you’ll want to know what monthly costs you’ll be up for, and how that compares to your current expenses as a renter. You’ll also need to work out whether you can afford a mortgage and your rent, if that’s your situation.
What’s the first thing I should do to secure an investment property?
Rule #1: Find out what you can afford. As I mentioned, speaking to a Financial Advisor will give you an idea of what you can afford to pay on top of your current expenses, while a Mortgage Broker will be able to decipher your borrowing power and whether you’re entitled to any schemes.
Once you have a grasp on your financial position and your broker has given you pre-approval for a loan, it’s time to make an offer on the property you’ve got your eye on.
What costs should I keep in mind?
There are often building and pest inspections to be completed before the property is yours, as well as strata reports if your investment property is in a shared block such as townhouses or apartments.
There could be a stamp duty involved, registration and legal fees on top of the purchase price.
Then of course, once you become the owner of the property, your ongoing fees will include mortgage repayments, landlord’s insurance, council rates, strata/body corporate fees, and agent’s fees.
What type of property should I buy?
Where you buy and what you buy are decisions only you can make. However, as a Property Buyer, I can advise demographically on what suburbs may be best suited to your needs based on the type of person you want to rent your new pad, and how certain types of investment properties can ‘play out’ when leased in certain areas.
But at the end of the day, the investment property needs to feel right for you, as the new owner and landlord. What are your goals? What is your strategy? These are questions we need to discuss before locking you in to a potential investment.
What’s your most important piece of advice for buying an investment?
Identify your goals! Know from the get-go what you want, what you don’t want, what you’re willing to sacrifice and the work you’re willing to put in for a property you are unlikely to live in yourself.
Know how much you can borrow, and how long it will take you to pay back. If your goal is to pay it back sooner than required, how many extra hours or days of work will you need to put in each week to make this happen?
Knowing where you’re going on your investment property journey is a must. Without a plan of attack or that compass to guide you towards your goals, you may find you make some costly mistakes along the way – and that’s something I want to help you avoid.
Got another investment property question? Send us an email or give our office a call on (02) 8916 6172. We’d be happy to help!
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