Buying your first investment property requires research and planning. Too often the choice is made for the wrong reasons, which can be difficult to reverse, if at all.
These are the five most common errors:
Buying a property based on the suggestions of friends or family
Many factors need to be considered such as capital growth and rental return potential, as well as the longer-term prospects for the investment and the area that it is located in. This is not a quick return opportunity and should not be purchased that way. Most Real Estate Institutes in each state provide resources helpful to first time investors such as the long-term performance of suburbs in terms of capital growth as a start.
Selecting the wrong investment loan product
There are many types of investment lending and each have a unique offering that may or may not suit the first-time investor. Professional advice needs to be sought from a Mortgage Broker to understand the investor’s unique financial situation and needs, also considering the longer-term nature of the purchase and then offering a wider range of options to suit. Principal and Interest loans compared to Interest Only or Fixed Principal and Interest Loans, there is no one product suits all and advice is key.
Going it alone, not seeking the support of a quality property manager
Some first-time investors try to seek out the ideal tenant by themselves and manage that transaction ongoing. A quality property manager would know how to thoroughly check references and be the professional go-between to avoid direct conflicts with your tenant. They know the laws to protect you and the tenant, and are best equipped to deal with an unreasonable tenant request. Plus, the cost associated with the professional management of your property is usually tax deductible.
The property was selected as it suited the owner, but was not purchased to suit a potential tenant
Is the location near public transport? Have you considered local services such as schools, shops, doctors, dentists, vets? If you are prepared to allow pets, is the fencing suitable? Are the kitchens and bathrooms in good working order? Lastly, is the yard and garden low maintenance?
Is there an oversupply of other rental properties in the area?
The price might have been right because there are a lot of properties without tenants in the area, or an oversupply of apartments. If this is the case and you still want to buy, the above four tips become even more relevant to make your investment stronger, different, resilient.