10 Essential Tips for Buying Your Investment Property
Smart investing starts with smart planning – here's how to get it right from the start.
1. Define Your Investment Strategy
Before you start browsing property listings, get crystal clear on what you want to achieve. Are you looking for steady rental income, long-term capital growth, or a combination of both? Your strategy will determine everything from the type of property you buy to where you buy it. Remember, you're not buying a lifestyle – you're building wealth.
2. Keep Your Heart Out of It
This isn't your dream home, it's a business decision. That charming cottage with the quirky layout might tug at your heartstrings, but will it appeal to tenants? Focus on properties that make financial sense, not emotional sense. Be prepared to invest anywhere the numbers work – even if it's in a different state.
3. Choose the Right Property Type
Your investment property needs to appeal to both current renters and future buyers. Research what's renting quickly in your target areas and what's sitting vacant. Generally, properties that attract a broad tenant base (like well-located apartments or family homes near schools) perform better than niche properties.
4. Weigh Up Old vs New
Both established and new properties have their merits. Established properties might offer better value and immediate rental potential, while new properties come with depreciation benefits and lower maintenance costs initially. Don't dismiss a property just because it needs cosmetic work – the ability to add value through smart renovations can boost both rental returns and capital growth.
5. Location Will Make or Break You
A great property in a poor location will always underperform. Look for areas with strong fundamentals like proximity to employment hubs, quality schools, public transport, and everyday amenities. Consider the lifestyle your tenants want – can they walk to cafes and shops, or catch a train to work? These conveniences translate to tenant demand and rental growth.
6. Know Your True Budget
Get pre-approved for finance, but don't stop there. Factor in stamp duty, legal fees, building inspections, and any immediate repairs or improvements. Always keep a buffer for unexpected costs and vacancy periods – you might not find tenants immediately, and properties sometimes need urgent repairs.
7. Structure Your Purchase Wisely
How you buy your investment property can significantly impact your tax position and asset protection. Whether you purchase in your own name, through a family trust, or via your super fund, each structure has different implications. Get professional advice to ensure your purchase structure aligns with your overall financial strategy and protects your existing assets.
8. Focus on Tenant-Friendly Features
Think like a tenant when evaluating properties. Features like secure parking, air conditioning, dishwashers, and good storage appeal to a wide range of renters. Properties with broad appeal – like ground floor apartments (good for families and older tenants) or places with outdoor space – typically achieve higher rents and lower vacancy rates.
9. Understand Market Timing
While you can't time the market perfectly, understanding current conditions helps you make better decisions. Sometimes it's a buyer's market with more choice and negotiating power, other times sellers have the upper hand. If you're not confident reading market signals, lean on your broker and other professionals for guidance.
10. Build Your Expert Team
Successful property investment isn't a solo sport. Work with professionals who understand investment properties specifically – not all real estate agents, accountants, or finance brokers are investment-savvy. Your mortgage broker can connect you with investment-focused professionals including buyer's agents, accountants specializing in property, experienced conveyancers, and qualified building inspectors.
