Buying an Investment Property: 8 Things Every Aspiring Landlord Should Know
February 6, 2024
Property investment is one way to build wealth and according to expert, Michael Yardney, from Property Update, there are five ways property investors make money: through cash flow, capital growth, accelerated or forced growth, tax benefits, and equity payoff.
The property market moves in cycles and although favourable results are dependant on where we sit in that cycle, the property's location and the current economic conditions, homeowners and investors stand to make an average of 5-6% profit nationally each year; more, where the demand is greater.
There's no denying that when the stars align, there's no better way to build wealth than in property investment. As best-selling American property author Robert G. Allen said: “How many millionaires do you know who have become wealthy by investing in savings accounts?”
The goal of most investors is to make money with the least risk possible
But is it really that easy?
As with any investment, property investors must "speculate to accumulate" and any smart buyer understands that for the best return, due diligence is critical. There are no guarantees in life so investing money anywhere is never an easy decision and buyers must understand their risk.
One way is by using our BUYER ASSIST service, which has been highly successful in helping many of our members secure their first investment property. You see, we designed it to remove the stress from the process, and with decades of property analysis, negotiation experience, and deep market knowledge behind us, our team guides them every step of the way to success.
Our mission is to help our investors build wealth
To help you manage your risk, we’ve created a list below of what every aspiring landlord should know before buying:
Your reasons for investing, that is what you hope to gain from owning an investment property – There are many different reasons for buying and it may surprise you to know that not all of them are about building wealth. However, for most buyers that is generally the long-term goal, along with the expectation of generating income immediately. For others, the decision may be a lifestyle choice such as a holiday home, i.e., more of a family legacy. The property is likely to make some capital gain over time, but that is not the owners priority. It is important to be clear about your goals because these will affect your choice of property. Michael Yardney's advice is to "Get the core principles right first."
The importance of your research and planning – Never underestimate the value of foresight. How, where, and what are the simplest questions to ask before buying, which in real estate terms can be substituted by budget, location, and property type. Let's look more closely at these three important considerations :
Your financial obligations. What will your investment cost in the short and longer term? Be generous in your appraisal. Plan and budget for ongoing expenses such as property taxes, insurance, maintenance, repairs, and vacancies. Find out the cost of the insurances you require, i.e., Landlord, Liability, and Building.
Your property’s location. This could hold the key to how much income your property generates and if you expect it to generate money immediately, location, rental rates, tenant demographics, vacancy trends, school catchments and local amenities must be considered
The type of property you are buying: If you intend to rent out your property, its appeal in terms of design and location will be critical. For a while, we have benefitted from a landlord’s market, but that may not always be the case and demand differs by location.
Your legal responsibilities – A professional assessment of the property contract may prove invaluable, especially if there are special conditions which preclude certain types of rentals. The laws are currently changing in many states so you should become acquainted with tenant v landlord rights, understand your responsibilities, and know your way around the legalese of lease agreements.
How to manage your risk – Minimising costs is obviously your priority, but there are some things you have less control over. Poor workmanship, building defects, the impact of climate change and extreme weather events can open a can of worms, so it may be worth checking out any building or environmental risks in your area. Check out if you are in a fire or flood zone, consider a Geotech report (if advised), and thoroughly check through your rights and guarantees with a new build. An emergency fund is a smart idea so you don't fall at the first hurdle.
How you will manage the property -Be honest with yourself about how much time you are willing to spend on your investment, especially if you are time-poor or retired. Though you will pay a percentage of your profit to a rental agency, they are objective (so not emotionally involved), they remove the stress of renting, taking care of vetting and evicting tenants, inspections, repairs etc. Consider the pros and cons of both options.
The value of a good relationship with your tenants - Many landlords underestimate this aspect of being a landlord, especially if they are not managing the property themselves. But in my experience as a renter, those landlords who are fair and quick to respond to issues foster a better, more mutually beneficial relationship with their tenants. Replacing tenants is not always an easy process and neither is finding good ones.
“Buy land, they’re not making it anymore.”Mark Twain, writer and humourist
Australia has a shortage of liveable land and vacant rental property, so if you've got the cash, buying an investment property is a no-brainer and we have a hub of stunning, ready-to-buy, off-market properties that are certain to grab your attention. What's more, we give you the option to take a peek for FREE!
But there's more. We also offer a turnkey service that facilitates the off-market buying process for you. We carry out your initial property search and narrow down those findings to a shortlist of potential listings, we offer home loan advice and sales negotiation assistance. We'll even even find the right energy provider for you.
Off-market transactions make up 20% of Australia's total property market and as Australia’s leading place for off-market, pre-market, and secret listings, we guarantee you'll buy at the lowestprice and for the best terms.
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