Buying an Investment Property
Stage 6: Choosing Your Investment Property
What sort of property do you want?
Would you like an apartment or a unit or a house?
Investing in an apartment or unit going to have extra costs called strata fees or body corporate fees. These fees can strips your cash flow and you have very little control over what is done. While you are an investor there will be people who live in and own the other units. Since these people actually live there they will have different ideas for the money versus an investor who just owns the unit.
There are also issues to consider when buying a house. Just make sure you do your research and make a wise decision on what kind of property
you should invest in.
Are you after income yields or are you after growth?
Yield is the 'return' you receive on a property investment – most commonly in the form of rental income.
Gross rental yield is calculated by totalling the income, or rent, you may receive from your investment property and dividing it by the sale price, or value, of the property.
While gross rental yield can be a useful, net rental yield tends to be a more accurate estimate of your return. This is when you factor in the other costs associated with your investment such as mortgage costs, taxes, rates and strata fees.
Growth refers to how much the capital value of a property increases over time. There is always a chance that your property might decrease in value.
Normally high growth properties will return low yields and vice-versa.
Many people choose to buy an investment property with a plan to sell it in the near future. In Australia, for many years, property prices have been rising and it could be a matter of waiting for interest rates to fall or property prices to go up to make a profit from selling a starter home. There is, however, no guarantee whatsoever that this will happen!
Others may buy a place in poor condition, do it up and sell it for a profit.
This isn’t the case for everyone.
By setting yield and growth targets you can eliminate those properties that don’t meet your requirements.
We’re here to help you
Dealing with banks can be a stressful experience but rest assured that our mortgage broker based in Glenelg (but our mortgage broker services the entire Adelaide Metropolitan area) can help you make the right decision about your mortgage. We will guide you at every stage of your loan process.
Contact us on 08 8376 0455 or drop into our office at 593 Anzac Highway, Glenelg SA 5045.
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this article is correct as of the date of publication and is subject to change.