Buying your first (or next!) property is an exciting venture, but it can also be quite daunting — especially if you don’t know what to look for.
For those who are unsure how to go about it, following this 12-point checklist for buying an investment property should help you grow your wealth.
Set your long term goals
Understand why you’re planning to buy that property. Is it your next home or is it an investment? Why are you investing? What size portfolio are you planning to grow?
This way you can set your investment strategy.
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If you don’t know where you’re heading any road may get your there, but most roads can get you lost.
Get your budget in order
First thing’s first: you need to get your budget sorted. Do you spend less than you earn? Have you saved a deposit? How much spare cash do you have each month to service your loans?
There’s no point in even beginning your search until you’ve completed this step, because determining your spending level and what you can afford will narrow down your property purchase decisions.
Organise your finances
It’s likely that you’ll be needing a bit of financial help in the form of a bank loan when you make your purchase, so see a finance broker and ensure you have your pre-approval sorted before you begin looking.
While it’s important to keep an eye on interest rates, there are many other important factors in determining the best loan for you, so it’s worth working with a mortgage broker to make sure you’re getting the most flexible loan structure to suit your needs.
Being prepared will make the whole process easier and put you in a better negotiating position.
Research the market
This is such an important part of buying property.
Remember the location of your property will account for up to 80 per cent of its performance
So spend your time researching different suburbs, considering factors like demographics, the local economy, jobs creation, new infrastructure, access to schools and shopping centres.
The right property
Then look for an “investment grade” property in that location — one that will be in continuous strong demand by a wide range of people that will want to live there.
And I don’t only mean tenants.
Your property must also appeal to owner occupiers who will want to buy similar properties pushing up values in the area.
Getting some expert advice from a property strategist and/or a buyer’s agent can be hugely beneficial.
They act as your representative and will help you find, negotiate and purchase the right property.
While you could do this all yourself in between work, family and other commitments, if you’re a novice when it comes to the property market, then a buyer’s agent can take a lot of the confusion out of the process and level the playing field.
When you’re buying property, this is not the time to make rash or emotional decisions.
When you begin inspecting potential properties, check out how the toilet flushes, whether the taps all work, how strong the water pressure is in the shower, and whether the power points work.
Open cupboards and look for any signs of mould on the walls, ceilings and in cupboards; you can never be too thorough, and remember that if you buy the property, you inherit these problems (and their repair bills!)
Seek further advice
Once you’ve found a property that you’re seriously interested in purchasing, if it’s a stand alone property rather than part of a block of apartments, it’s crucial to hire a building and pest inspector who can prepare a report for you.
They will perform function and safety inspections of the property and inspect the entire house, top to bottom, and write up an evaluation that details whether the building is up to code or not. It’s also advised to have a pest inspection conducted too.
It can be easy to become carried away with big goals and bold dreams of finding the perfect investments, but it’s important to remain practical about it.
Remember, no property will tick all the boxes.
However if the property doesn’t stack up or if the price is too high, walk away. There will always be other properties.
Remember, you don’t have to accept the asking price.
You should always try and negotiate.
Of course, an experienced buyer’s agent can do this for you if it’s not your strong suit.
However, in the hot markets that still exist in some parts of Australia it’s hard to negotiate a significant amount off the asking price when there are more buyers than there are good properties around.
But remember, you can negotiate over much more than simply the price.
Conditions such as the length and date of settlement, deposit, early access to the property and rent-back opportunities could swing the deal in your favour.
Enlist a solicitor
Conveyancing is an important process that facilitates the legal transfer of ownership of the property, from the vendor to the buyer.
A solicitor will take care of all the legalities involved and check the contract as well as advising you on contract conditions and clauses.
So be sure not to sign anything until your solicitor gives you the go ahead.
Buying a property is not something that can be done on a whim.
It takes time to find the right piece of real estate for you, so give yourself a realistic timeframe to search, locate, negotiate and buy your property.
Becoming familiar with the market will help you to gain a better understanding of how the process of successful property investing works, which will ultimately help you make the best decision.