Before venturing into buying an investment property, it's essential to establish a strong financial foundation. This includes determining your spending limits to avoid overextending yourself with a property that could strain your budget.
Follow these four steps to kickstart your path to property investment.
Step 1: Get a Deposit and Work Out How Much You Can Borrow
Before embarking on the acquisition of an investment property, it is vital to establish a sturdy financial foundation. This entails defining your budgetary limits to steer clear of overextending yourself with a property that could strain your finances.
Step 2: Decide Your Investment Strategy
Next, define your objectives for your investment property. Are you seeking a property that immediately generates substantial income and proves profitable from the outset? Alternatively, are you willing to cover a modest monthly deficit with a broader goal of reducing debt over time as the property appreciates?
These inquiries will assist you in determining the most suitable property investment and gearing strategy for your preferences. Moreover, they will aid in identifying the type of property that aligns with your goals, whether it be a capital growth property or one that yields high returns.
Capital growth signifies the increase in the value of a property over time, whereas yield reflects the 'return' derived from a property investment, often in the shape of rental income. Generally, properties with high growth are more costly and negatively geared, whereas those with high yield are more economical and positively geared.
Step 3: Begin Researching Property
With a clear understanding of your property investment goals, it's time to contemplate the type of property and its location.
Properties situated in proximity to public transport, healthcare facilities, retail outlets, childcare centres, and other amenities are typically in higher demand. Although the initial cost may be higher, these properties generally demand higher rental rates.
Once you've determined your preferred location, examine the sales and rental prices of comparable properties in the area. This analysis will give you a reliable estimate of the potential rental yield.
Step 4: Settle and Manage Your Investment Property
Settlement day progresses much like it would for a personal home purchase, except there's no key handover for moving in. Instead, you enlist the expertise of a property manager to either secure a new tenant or take over the existing lease agreement. With a capable property manager and the right insurance coverage in play, your investment property journey continues smoothly.