Property investment can be an involved process which we try to make as smooth and easy-to-understand as possible. To ensure you have considered all that is required before making the big purchase, we’ve outlined some key steps you need to take.
Commit yourself long term
A property investment is best considered as a long-term commitment to maximize the chance of it being worthwhile for you. So the very first step is to evaluate your budget, constraints and future objectives and obligations.
“Consider your future as far ahead as you can,” says Dave Lennox, Partner and Finance Broker with Vision Property & Finance. “You need to ensure that your ability, commitment and financial capability can withstand a minimum of five to ten years, as that’s what generally brings premium results.”
Build a professional team around you
The next step is to seek professional advice. It is your opportunity to ask as many questions needed to alleviate any uncertainty you may have.
“Whether you’re chasing a great rental return, maximum capital growth or tax effectiveness, speaking to a combination of advisers (financial planner, finance broker, investment property advisers, accountant, solicitor etc) will help you make the correct property investment choice,” says Dave.
Talking to friends, family and acquaintances who have, or are currently considering investing, provides a different world of advice.
Dave advises “whenever I am making big decisions, I talk to as many people as possible, especially my trusted friends and colleagues that I know have already taken similar steps down the investment path. They can tell me all the good and the bad that they have experienced so that I can start the process with my eyes wide open.”
Getting finance ready…the paperwork
As well as proof of your current income, employment, debts, and loans, gather any paperwork that helps support your character in the application. For example, if you have been a long-term tenant, get a 12-month tenancy legibility that proves your ability to make regular repayments. Before applying for a loan, minimise your current debt load, and if possible reduce the limit on any credit cards you have, as this is perceived by lenders as potential for debt.
It is also advisable to have a fully assessed pre-approval before you start your search, as this will allow you to make an offer once you’ve found a property you like.
Key things to consider
Dave recommends choosing a property based on whether or not you feel like it can attract renters and, if possible owner occupiers as well. It is not necessary that you would particularly want to live there, but you do need to understand who would?
‘Basically, you need to think of your investment property as a business and you need to know where your customers are coming from. Your customers are both people that would rent it AND people who may buy it in the future. Why would they want to rent/buy your place in that location as opposed to other properties? It’s not an emotional decision, it’s a business decision. But you also have to adopt the mindset that you could be selling to an owner/occupier down the track, which could be an emotional purchase.”