Some guidelines for investing wisely
AS MORE than a million property investors around Australia will tell you, buying an investment property involves a great deal of forward planning, not unlike the purchase of a family home.
But while the decision to buy a home to live in is usually quite emotive, buying an investment property should be solely based on rational and practical considerations.
“Investors have to remember that where a family home is a purchased from the heart, an investment property is very much a purchase from the head,” Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella said.
“It is a business decision, and like any business decision, it must be underpinned by a well researched business plan.
“Property has been, and always will be, a good financial investment as long as people take the necessary steps to ensure they don’t get caught out.”
Unless investors have done all their homework, they could find themselves stuck with an investment property that cannot be rented due to poor location or demographic factors. As a result, they may wind up having to sell it for less than they paid.
To minimise the risk of being lumbered with a bad investment, the REIQ recommends buyers do their homework and research the area they intend investing in.
“Try to ensure that the rental market is strong in the area you purchase property in," Ms Mer- corella said
“The REIQ produces a quarterly research publication called Queensland Market Monitor, which contains very useful information about the local market, including vacancy rates and median weekly rents.”
Not only does a buyer need to know what price they can expect to pay, but they also need to be aware of what sort of return they can expect from their investment.
Discuss your financial situation with an accountant or qualified financial advisor and ensure that your situation will allow for possible increases in interest rates or a period of time when the property may be vacant and without a tenant.
A good tip is to check the properties for sale online. Find properties with similar features and compare their prices.
“There will, of course, be some properties that are worth more than others because of certain attributes, such as proximity to water or public transport,” Ms Mercorella said.
“But this simple research should prove a valuable guide to determining what is on the market, and at what price.”
The sorts of factors important to most tenants include: being close to public transport, having access to community infrastructure such as schools, shopping centres and medical facilities.
The student accommodation market is an important consideration for many property investors and, to tap into this segment, investors should focus on the suburbs within five kilometres of a major tertiary institution.
Another tip is to talk to an REIQ-accredited agency, who can provide informed opinion on market trends.