What are the most important things to look for when investing in a property for the first time? It’s a commonly asked question among budding investors and, with the right advice, can yield good returns and lead to long-term financial gain.
Guest post by CEO at Your Empire, Chris Gray
To make a good property purchase, first-time investors must consider multiple factors that will increase their capital growth. As with any long-term approach to growing your wealth, you can make some smart moves to put yourself in a better position and increase your chances of getting that return on investment that you’ve always wanted.
If you’re looking to invest in your first property, here’s what you need to consider:
1. Think location, location, location
Ask yourself whether a tenant would be happy living in your investment property of choice. After all, a tenanted property means a reliable income stream. It’s also important to consider the travel distance to the CBD, how close the street is to public transport and – although it’s difficult to predict – whether the suburb will grow in the future, which usually comes down to lack of supply of properties and strong demand from renters and buyers.
2. Consider light and heat
Despite the unique features the property might have, it turns me off straight away if it is not naturally well-lit. In Sydney, most prospective home buyers are looking for north and north-east facing aspects as these properties generally tend to be both warmer and lighter.
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3. Do your research
Do the necessary groundwork to help you secure the best price possible. Read property websites and magazines to build up your knowledge, and get the right advice from professionals, who will be able to provide you with the latest insights, enabling you to make a well-informed decision. However, once you’ve picked two or three suburbs and inspected at least 20 properties in each, it becomes hard to compare one against the other. So, like everything, make a list! Take note of the number of bedrooms in each property you inspect (double bed-sized bedrooms are a must), whether it has a garage, a balcony, a view, the actual selling price, and more.
4. Treat your property investment as a business
If you begin treating property as a business, not only should it deter you from making an emotional purchase decision, but it will focus your energies on increasing the rental returns. My recommendation is to buy within 10-20 per cent of the suburb’s median price range, as the rent at this level will be affordable for 70-80 per cent of the population. You will always have a tenant. In contrast, if you buy a high-end property as your investment, only a tiny percentage of people will be able to afford to rent it, and there’s a smaller chance of finding a tenant – or a buyer if you ever choose to sell.
5. It doesn’t have to be perfect
Do not worry if not everything about the property is 100 per cent perfect – a place that’s liveable enough to rent out straight away is often the most realistic and affordable option for new investors. If you have an eye for improvements, investing in a place that needs some renovations presents a real opportunity for equity. However, beginners should start with minor improvements rather than a complete renovation when purchasing a property to’ flip’. Doing this will allow you to save time and plan for a total renovation. You’ll also get to see the difference between the property’s worth and what you can make it worth.
Residential property is a great investment option, so first-time property investors should rest assured that any short-term pain involved in saving for an investment is worth the financial benefits down the track.
Chris Gray is the Property Expert at Your Empire Buyers Agents, Renovators and Property Management in Sydney, New South Wales. As an investment property expert, Chris teaches people how to create wealth and improve their work/life balance. Chris is a professional investor, qualified accountant, buyers' agent and mortgage broker. He has funded his lifestyle with an investment property income for over 15 years.