Owning an investment property isn't hugely difficult - but succeeding can be. It takes time, expertise and effort to select, organise, manage and maintain the property, deal with tenants and ensure your investment is performing as it should be.
To make sure you get the results you want, follow these five essential rules for successful property investment.
1. Only invest where people want to live
Generally, if more tenants want to rent your property and more buyers want to purchase it, it'll obtain a higher rental rate and eventual sale price. For that reason, you should stick to buying an investment property in areas that people want to live in, where demand is high.
That said, you should also consider the future of the area in which you're considering a purchase. Are there new developments, cool cafes and shopping precincts popping up? If so, that's a good sign that the area will become more popular and that your property will increase in price.
2. Consider cash flow
If you don't have the cash to pay your mortgage or maintain your property, your investment will quickly fail. When buying, never overextend your finances and make sure that your income is sufficient to cover all expenses of unexpected events like if a tenant has to leave.
If you don't have the income to pay the property's expenses, look for properties with neutral or positive cash flow so that your rental income is enough to cover mortgage repayments and other expenses.
3. Keep the market in mind when buying
To make sure there's demand from tenants and buyers for your property you need to keep the local market in mind when buying.
For example, if you're purchasing in an inner city area occupied mainly by students and young professionals, a lower cost, one or two bedroom property might be your best investment option. On the other hand, if you're buying an investment in an affluent family area, a three or four bedroom with plenty of extra space might be a better choice.
4. Do your research
To succeed as an investor you need to know the market well. That means researching average property prices, rents and rental yields in the area, as well as past price and rent movements.
This will help make sure that you:
- Only buy in a growth area.
- Don't overpay when buying.
- Charge your tenants market rent.
To learn more about the market, speak to a local real estate agent that you trust.
5. Build a team of professionals
Property investors rarely succeed on their own. Most do so with the help of a large team of professionals like mortgage brokers, accountants, building inspectors, conveyancers valuers, insurance brokers, property managers and real estate agents.
Start building your property investment dream team and get in touch with your nearest Professionals Real Estate office today.