What you need to know be­fore you buy to rent

Con­sumer tips ... pro­vided by REIQ

Whitsunday Times - - REAL ESTATE -

FOR buy­ers look­ing to start or ex­pand their in­vest­ment port­fo­lio, the de­ci­sion-mak­ing pro­cesses are vastly dif­fer­ent than buy­ing a home to live in.

And, ac­cord­ing to the Real Es­tate In­sti­tute of Queens­land (REIQ), the cur­rent eco­nomic con­di­tions mean in­vestors need to be ex­tra care­ful in how they choose and man­age in­vest­ment prop­erty.

Look­ing for the per­fect in­vest­ment prop­erty

Most suc­cess­ful prop­erty in­vestors buy in ar­eas they know, close to where they live.

Buy­ing a rental prop­erty has a check­list that is manda­tory rather than op­tional and most peo­ple look for houses or units that are: well con­structed; me­dian priced; in a good lo­ca­tion; and in a ma­jor ur­ban area that has good long-term em­ploy­ment and growth prospects.

In­vest­ment fun­da­men­tals

A buy-to-rent strat­egy will fo­cus on meet­ing es­sen­tial in­vest­ment cri­te­ria in­clud­ing:

Has the lo­ca­tion per­formed well over the long term? What are the nor­mal rental re­turns in this area? Is the prop­erty con­di­tion such that re­pairs and main­te­nance will im­pact sig­nif­i­cantly on rental yield?

Are there any park­ing dis­ad­van­tages that would dis­cour­age renters?

In­vestors also need to have a keen aware­ness of the in­ter­est rate en­vi­ron­ment, in­clud­ing how higher rates might af­fect ex­pected net re­turn and the po­ten­tial mar­ket for their prop­erty should they wish to sell. Most in­vestors also choose to bor­row on a fixed-term and in­ter­est-only ba­sis. This gives them more cer­tainty on in­ter­est rate costs.

Tax mat­ters

Savvy in­vestors know that a well-con­sid­ered main­te­nance strat­egy (such as clean­ing car­pets and keep­ing land­scap­ing tidy) can be ef­fec­tive in achiev­ing op­ti­mal rents and re­duc­ing tax. De­pre­ci­a­tion also works in your favour when you own an in­vest­ment prop­erty. In­vestors should con­sult a tax ad­vi­sor to find out the tax pros and cons of in­vest­ing in rental prop­erty.

Man­ag­ing the prop­erty

An in­vestor’s aims should be to max­imise their re­turn and pro­tect the value of the as­set into the fu­ture.

Man­ag­ing a prop­erty takes time and ex­per­tise if it is to be done prop­erly. A prop­erty manager can iden­tify suit­able ten­ants, check ref­er­ences, and en­sure that doc­u­men­ta­tion is in or­der in re­la­tion to leases, rental bonds and pay­ments.

They will also take care of on­go­ing com­mu­ni­ca­tion with ten­ants, con­duct in­spec­tions and co­or­di­nate main­te­nance of your prop­erty.

REIQ ac­cred­ited agen­cies com­plete com­pul­sory com­pli­ance and pro­fes­sional devel­op­ment train­ing and have ac­cess to all the lat­est leg­isla­tive and prop­erty mar­ket up­dates.

Cap­i­tal growth

When it comes to don­ning the in­vestor’s hat, cap­i­tal growth con­tin­ues to be the fun­da­men­tal goal for most res­i­den­tial prop­erty in­vestors. Home buy­ers all want their patch of land, but it is land value, not land size, that drives cap­i­tal growth.

And if you don’t know where to buy, fol­low the preva­lent de­mo­graphic trends and buy where de­mands ex­ceeds sup­ply.

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