Making your first property investment

Let’s gauge whether you’re ready to take the investment property plunge and have a look at what to do to make it a smoother ride.

Money for Nothing

Investing in property is not some magic fountain of money – you need to have your finances set up and available before you even consider dipping your toe in. Make sure you’ve done the maths and worked out the household income, debts and expenses – this is an investment property, so the last thing you want to do is overextend yourself. Stick by this very simple rule: buy what you can afford.

Another important factor before beginning your foray into investment property is to think about why you’re investing in the first place – are you looking to for a long-term way to make a profit or as a tax minimisation strategy?

It can be worthwhile to get your loan pre-approved so you’re totally aware of what you can/should spend. It can also be worthwhile it enlist the help of a financial advisor to help you work out how to structure your loan and finances and which loan to go for.

Hello equity

Equity you have on another property could also aid you in your quest for an investment property. You need to talk to your lender about how much equity they will release to you as well, as there does need to be safety net to protect their best interests. You also need to ensure that you have a safety net – if you have no other assets or spare savings, you don’t want to use all of your available equity on this venture in case of an emergency.

First home an investment property?

In April this year, joint research by RFi and Macquarie Bank revealed that many first homeowners are buying into the market as an investment in order to offset high property costs in those early years. If this applies to your situation you need to get acquainted with the ins and outs of the property market and make sure you’re financially ready for the ebbs and flows of the market, before you jump in and commit yourself. Again, if you’re quite green to the investment game, it wouldn’t go astray to get a financial advisor on your side.

House or apartment: that is the question

As investment properties both have their pros and cons and depend entirely on the property itself. Let’s have a look at some.

Houses are great investments, but you do need a check a few things you should check with the local council and estate agents before you delve in. Questions on the hit list should be renovation restrictions of the area (check if it’s a heritage zone or prone to certain environmental disasters) and if there are any major developments going up (or any works that could impact property prices). Also, if any construction is about to happen beside your potential investment property, that’s going to impact your potential for tenants and the rental price.

Units can be just as lucrative in terms of investment, but be aware that you will be dealing with a body corporate that may have regulations on types of renovation and that you will also be privy to quarterly strata levies. Make sure you consider these factors against the rental return.

When it comes to your first property investment, there’s no hard and fast rule telling you when to dip in. The main thing is to buy what you can afford and ensure your finances are set up to provide you with a safety net in slow times. As the saying goes “it’s not ‘timing’ but ‘time in’ the market which will return the best result.