Investing in property can be a lucrative game if you get the details right and the market dynamics at the time suit what you are trying to achieve. Just because you are investing in bricks and mortar doesn't mean there is no risk - do your homework, an uninformed property investor is gambling not investing.
1. What you want to achieve
By deciding what you want to achieve, you will have a better idea of how to tailor your plan going forward.
Things to think about include:
Do you want to buy a rundown place, do it up and flick it on relatively quickly?
Or do you want to invest in properties to then rent out and hold onto waiting for capital growth (a value increase over time)?
Do you want to invest in commercial or residential property.
2. Know the market
Understanding the market will mean you can get an idea of what you should be paying and whether you are likely to get yourself a bargain or if will be paying above market value – each of which can affect your gross yield or end profit. You will need to consider also which suburbs are the best to invest in. You can find a range of stats on different suburbs across the country as well as how the market is trending in Property Trends. Look up individual properties in the area, check out what they are selling for, look at the Property Profile trends for both individual properties and the suburb, check out the market rents - spend that extra time to understand what is happening in the market.
3. Do the math
Depending on your aim, you will need to do the math to figure out what makes financial sense. If you are renovating to sell for a profit for example, you will need to factor in the purchase price, how much renovations will cost, how much you are likely to sell for, and of course any fees whilst you own the property such as real estate agency fees, mortgage repayments, rates etc.
If you are looking to rent the property, then you will need to consider how much all the bills add to, including mortgage repayments, rates, body corporate fees if applicable, insurance, legal costs for tenancy contracts etc, and then see if you make any profit after receiving a reasonable market rental income. You can get a gauge for rental prices by looking at our Rental Analysis info . You can of course be interested in capital gains from market movement, but you still need to make sure you aren’t making a loss whilst you own the property.
4. Know the risks
As with everything, there are associated risks. You will need to talk to the banks and get advice on things like mortgage options, interest rates, how much you will need as a deposit and how much they are willing to lend. With simple things like increased interest rates, you may see your profit reduced.
If you are renovating you don’t want to get caught short if your costs start racking up, or if they get delayed. You need to be sure you can cover the costs and that you have contingencies. The same with having tenants – you need to be able to cover the costs if it’s untenanted, and you have contingency funds if the property needs repairs and maintenance.
Understand the rules. Whether you decide to do-up a property or rent it out there are rules in place that you will need to know and adhere to. For renovations, you may need council consent for certain projects for example, whilst when tenanting there are different rules around collecting and lodging bonds from your tenants, contract obligations, and rules on being a landlord.
5. Understand the rules
Whether you decide to do-up a property or rent it out there are rules in place that you will need to know and adhere to. For renovations, you may need council consent for certain projects for example, whilst when tenanting there are different rules around collecting and lodging bonds from your tenants, contract obligations, and rules on being a landlord.