Buying an investment property is very different to buying a home. An investment property should be viewed like any other investment—based on its merits to generate a return and some long term capital gain. Before you take the plunge, think about whether the property you have chosen meets these criteria.
Tenants want a home that is easy and relatively cheap to maintain. They don’t want to be spending their weekends looking after someone else’s garden. They don’t want to pay a lot on top of the rent for electricity and hot water. A home with conveniences such as a dishwasher, builtin robes and efficient heating and cooling are must-haves.
Tenants have many options and are discerning—just like home buyers. Just because it’s a rental property doesn't mean it needs to compromise on space, access and security. Think about who will live in the property. If it’s a family home there might be children or pets. An extra family room or separate living areas are desirable and a secure fence is very important. Most tenants looking to rent a family home would expect an ensuite in the main bedroom. For families, proximity to schools, shops and other services are highly desirable. If you are looking at an apartment size, location and access are important. Does it have lift access to the higher floors? is the parking secure? And is there security and lighting at the entrance of the building? Is it close to transport and other facilities? Apartment renters want convenience and an easy lifestyle.
You don’t have to buy a brand new home or apartment for it to rent well. Most tenants prefer a clean, well-maintained home over super modern. If you want your investment property to appeal to a wide range of tenants, consider a single level home rather than a double storey home. If there are no (or very few) steps in a property it will appeal to families with young children and downsizers, so you will have rental appeal to a wider audience. That is unless the property has a great view—in which case tenants may put up with the steps to gain a better outlook.
Tenants are not interested in how much your loan repayments are or how much you are paying in land tax and rates. But for you these expenses can be critical. Before you start looking for a rental property, understand your budget in terms of how much you are going to pay for the property. And most importantly understand your cashflow. Are you comfortable for the property to be negatively geared (ie the expenses are greater than the income)? Or do you need a property that will generate a positive income for you from Day 1. Have you spoken to your accountant, your financial planner and your mortgage broker to determine the best financial strategy? Understanding your financial position over the long term will determine the type of property and location you should be looking at.
ď ?
Potential property
ď ?
Potential property Lift access
Cheap to run heating and cooling (including hot water)
Adequate public access areas for furniture delivery/removal
Energy efficient Dishwasher
Adequate dimensions in bedroom and living areas
Built-in robes
Secure parking
Clean and well maintained
Proximity to transport
Lights, oven, other inclusions working
Outdoor space (balcony or nomaintenance terrace Adequate noise proofing
ď ?
Potential property Ensuite 2 living areas Secure fencing
@
Secure parking Proximity to schools and shops Low maintenance garden Milestone Financial Services ABN 68 100 591 508, trading as Milestone Lending Solutions is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited. Australian Financial Services Licensee (AFSL 232 706) and Australian Credit Licensee (ACL 232 706). This brochure contains information that is general in nature. It does not take into account the objectives, financial situation or needs of a particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, AMP Financial Planning Pty Ltd (1300 157 173) and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/or percentage of either the premium you pay or the value of your investment. Please contact us if you want more information. Because of this, before acting on any information, you should consult a financial planner to consider how appropriate the information is to your particular situation.