Consider this before you invest in property

WHEN it comes to building a retirement nest egg for the future, property is still viewed as one of the safest long-term investments.

If you haven’t dipped your toe into property investment yet, you may be wondering about how to get started and there’s no doubt it can be a bit of a daunting process, but it doesn’t have to be.

There are a few strategies you can go with and what you end up pursuing really depends on what you’re looking for.

While some investors might be looking to buy a property and rent it out straight away with a view to start earning regular rental income, others may choose to live in the property while they renovate it, with a view of selling it in the short-term to make a profit.

Whichever type of investment you choose, whether it be long or short-term, investing in bricks and mortar can be a great way to create wealth.

Here are a few things to consider before diving into property investment.

Know your budget

It’s essential to have a thorough understanding of your cash flow.

It’s a good idea to speak to a mortgage broker about pre-approval of your investment loan so you know how much you’re able to borrow before you start your property search.

If you’re planning on renovating, you’ll also need to factor in how much you’d be willing to spend on doing a property up, including a buffer if expenses were to blow out.

Don’t underestimate ongoing costs Ensure your budget allows for rates, insurance and general maintenance/repairs.

Research your area thoroughly

When finding a suitable property, make sure you have all the facts and figures needed to make a wise investment decision.

Be realistic about your investment goals

Are you looking for capital growth or do you want to hold the property long term?

During a strong market period, it will be easier to renovate properties and sell them for profit.

But in slower economic times, a ‘wait and see’ approach may need to be taken as you wait to achieve capital growth while renting your property in the meantime.

Look for function over style

A rental property should be functional, neat and clean.

A stylish, finished home may not be what you’re looking for, especially if you plan to renovate.

A home in need of attention on a great street, in your desired area is going to have better short-term growth prospects once fixed up, then a brand new, finished home would see in a short time.

If you’re looking for something that’s ready to rent out straight away, a finished home may be a better strategy, especially if it’s ready for tenants immediately.

Use your head, not your heart, when choosing a property

Remember, you’re looking for a property that will either appeal to a large array of buyers or renters, not a property you yourself love.

So, think objectively, and look for the essentials that appeal to the broadest demographic.

Still paying off your own home?

It isn’t necessary (or usually realistic) to have your own home completely paid off before purchasing an investment property.

What is important is to have a good amount of cash to invest with, either to use as a deposit, to help renovate or to cover any unforeseen costs.

You may also have enough equity within your own home to help with the deposit needed to invest in a property, so have a chat with a mortgage broker about your options.

Do your due diligence

As with any property purchase, it’s always critical to do your due diligence.

Before signing a purchase contract, make sure you organise for a building and pest inspection to be done and thoroughly read through these reports to avoid expensive repairs later.

Don’t give up! It can be a long process finding the right investment property, but it pays dividends in the long run and could set you up for financial independence down the track.