What to Consider when Buying Your First Investment Property
So, you’ve bought your own home and now you’re staring at your ceiling wondering what the next goal should be. Is buying an investment property a possibility, you wonder? Maybe you get scared by the supposed magnitude of the prospect and put it in the “too hard” basket. Or you do some research and discover that starting an investment property portfolio is well within reach so long as you make some smart decisions. Because, the fact is, buying your first investment property can be the first step to making your money work for you.
Because you already have the house you live in, you’re aware of just how daunting the property world can be. You know that there are hidden costs and disappointments along the way. You’re not green anymore. But buying a house purely for someone else to live in requires a different mindset to acquiring your family home. It starts with taking emotion out of the equation.
When choosing your own home, you’re allowed to “fall in love with it” because you’re going to live in it. It will be where you build memories and raise a family. When buying an investment property, it exists purely to make you money and therefore the decision must be based on logic. All you need to have in your possession is market research of the area, the returns you will get on the investment and whether you have the cash or equity to buy. You need also to consider if the rent will cover all or a significant portion of the mortgage payments, if upkeep and maintenance costs will cut too much into your bottom line, and if immediate term passive income is what you are chasing or capital growth over time.
Taking your heart out of the process will allow you to formulate a plan. Knowing exactly what you want to achieve with the acquisition of an investment property will help you make the correct choice. For example, you may be thinking about buying a home that will double as a “holiday house” for yourself rather than a sensible family home for someone else. You may be happy to stop at one investment property or you’re eventually going to leverage it for the next one - and the one after that.
As with all investments, finance and budget planning is the key. With the royal commission has come an intense spotlight on the banks and as a result, they have tightened up their lending criteria. It is therefore essential to talk to an expert mortgage-broker, one with access to a large range of products across a large range of lenders. She or he will find out exactly how much money is available to you and, by working with other professionals such as buyer’s agents and accountants, he or she can also determine what and where you should be targeting. Once you have a well-informed budget, location and purpose, the fun can really begin and you can start on your perfect property acquisition.
A good broker will add value to your investment strategy. If the goal is to buy multiple properties, your broker can formulate a plan to release equity from your first investment property after a few years to help fund your second purchase and so on.
Use your broker's inside knowledge and expertise to match you with the right loan - one that will help you onto the first rung of the investment ladder... and one step closer to that financial freedom you have been dreaming of.