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 – Chris Gray, CEO of Your Empire
To make a good property purchase, first-time investors are best to 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
It is important to 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 it comes down to lack of supply of properties and strong demand from renters and buyers.
2. Consider light and heat
Despite whatever amazing features the property might have, if it is not naturally well-lit, it turns me off straight away. 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! It is important to 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 like 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 small percentage of the population 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, when purchasing a property to ‘flip’, beginners should start off with small improvements rather than a complete renovation. That way, not only can you take your time saving and planning for a complete renovation but seeing the difference between the property’s actual worth and what you can make it worth enables you to fall in love with your first investment, as you envision its full potential.
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.