Finding an Investment Property
It sounds like an easy way to build up your personal wealth but, good investment properties can be hard to come by.
To find the right investment property you will have to spend a fair amount of time viewing several properties before making an offer on the one that ticks all the boxes.
You will need consider several factors;
- Residential Property or
- Commercial Property
- The vacancy rate in the area is it high or low, lower the better
- Is the property in an area of growth, near schools, shopping amenities, medical centre’s this all adds up to the capital gains and rent potential on the investment property.
- The condition of the property, will you have to spend extra to make a good rental return
The yield (what you going to get) is important
The yield is the amount of money you will receive from the rent charged in a year. Less the expenses you have on maintenance, rates, insurance, a property manager cost, this is divided by the value of the property. Giving you a percentage, you ideally want 6% yield per year.
When it comes to investing, it’s most important to get work out what yield you’re going to get. This is the amount of money the property generates per year minus anything you spend on maintenance, rates and other costs, divided by the value of the property. You want to get a yield of 6% per year. You can take steps to increase your yield – like those renovations – but be aware they will cost money at the outset.
Positive & Negatively Geared Property
We all want a positively geared property, one that has a positive yield – this means the rent will cover your mortgage repayments and make give you a little bit extra.
The reality however, is that an investment property can be negatively geared, meaning the income from the rent does not cover the full mortgage repayments. You as the investor are topping up the mortgage payments.
This is not ideal if you are wanting to grow your investment portfolio as the lenders are less willing to lend against them.
In some instances, you may want to own a negatively geared property especially if you are expecting to make a capital gain when you sell the property. The gain will then be used to make up the shortfall on the property. You are buying a property for a family member to live in and you are subsidizing their rent by paying the short fall.
An investment property is a big step and as such you should be prepared to put in the hard yards.
Once you have your investment property you will need to consider;
- Do you want to manage the property yourself? Or
- Engage a Property Manager – there is an additional cost
Allsure Financial Solutions has access to a number of lenders both bank and non-bank to find a solution to meet your investment property goals.