Are you confident you know how to buy well?
Investing in property can be a great way to build wealth over time, but it’s important to make sure you’re buying well. Like any investment, the more you know, the better decisions you will make. With the right guidance, it is possible to make a smart and profitable property purchase. In this blog post, we’ll share tips on how to buy well in the Australian property market.
The Property Investment Specialists at Capital Properties know how to buy well. And it’s our mission to share our knowledge with you and help you prepare for successful investment during our FREE Discovery Session.
On the go? Here’s 30 seconds of take outs:
- The first step towards successful property investment is to know your budget.
- Make your money go further & take advantage of ADF benefits with the HPAS, HPSEA & DHOAS – more details below.
- Research national & local property markets for house prices, rental yields & vacancy rates.
- Get mortgage pre-approval.
- Work with a team of professionals to help you achieve your goals.
- Location is an important factor to consider when buying property.
- Consider the property’s potential for growth & rental income.
- Get a building inspection to check property’s condition.
- Be prepared to negotiate confidently or work with our buyer’s agent services.
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Know your budget?
The first step you must take towards successful property investment is to determine your budget. It’s wise to do this before you start looking at properties, so that you don’t waste time and resources on properties that are out of your price range.
To begin, you need to examine your current financial situation, including your income from your salary and any other investments. Then you need to make an honest list of all your expenses, related to your family, car, home, shopping, insurances, debts, and miscellaneous spending on leisure and entertainment. Yes, everything! All of this will dictate your future earning potential, how much of a deposit you can afford and your ability to pay off a mortgage. It might be worth meeting with a finance broker and getting a copy of your credit file to definitively establish your borrowing capacity.
Next, you’ll need to consider any future income you might earn if you’re planning to rent out the property and factor in ongoing costs such as property management fees, maintenance costs, and taxes.
Many people aren’t really sure where to start when it comes to budgeting for property investment. When you book a FREE Capital Properties Discovery Session, we’ll help you get a grip on the numbers. Our Property Investment Toolkit makes the process easier, and the Capital Properties Budget Planner is the best online investment calculator you’ll find.
Make the most of your budget
ADF members are often eligible for financial benefits, such as the Home Purchase Assistance Scheme (HPAS), Home Purchase or Sale Expenses Allowance (HPSEA) and the Defence Home Ownership Assistance Scheme (DHOAS). We’ve discussed these in more depth in the blog post: “Buying a house while in the Defence Force”. These benefits/incentives can help you secure a loan with lower interest rates and fewer fees.
It’s important to be realistic when setting your budget. You don’t want to overextend yourself financially, but you also don’t want to miss out on a good investment opportunity because you’re being too conservative. You do need to keep a close eye on your ongoing budget. This is where a cash flow analysis is essential. Check out our post “Getting to know your cash flow: It’s power to you!”
Once you know what your budget is, it’s time to start looking at the nitty gritty of how to buy well.
Research, research, research
Before you even start looking at properties, it’s important to do your research. This means understanding the national and local property market and getting a sense of what properties are available within your budget. Start by looking at property websites so you can research median house prices. Investigate the historical trends in the market, such as price growth or decline.
Read updates about what’s happening in the market, such as our recent post “Will Australian house prices drop this year (further)?” And stay informed on the latest property market news, data from reliable sources like Capital Properties Property Investment Resources.
If the plan is to buy an investment property, you’ll want to make sure there’s strong demand for rentals in the area. Look at vacancy rates and rental yields. Next, you’ll need to define your property selection criteria, i.e. what kind of property will attract your ideal “target” tenant. We know that many tenants prefer new builds, so investigate builders and build design. Talk to local real estate agents or property managers to help you make an informed decision on how to buy well. And remember it always pays to get independent valuations.
If this sounds overwhelming, remember that we’re here to help. Our Capital Properties Investment Process is designed to take you through this process step-by-step, all the while empowering you with the knowledge you need to make the best decisions for your circumstances.
Get mortgage pre-approval
Before you can make an offer on properties, or start building, it’s a good idea to get pre-approved for a mortgage. This will give you a clear idea of how much you can borrow and what your interest rate will be. It will also show sellers that you’re a serious buyer and can help you stand out in a competitive market. Learn more about pre-approval in this post “Why being finance ready pays dividends”.
Get a good team around you
When you’re ready to get started in the property market, or even if you’re building on your property portfolio, we strongly recommend that you surround yourself with a team of licensed professionals who know how to buy well.
A good real estate agent is a valuable asset when buying property. They’ll help you find houses that meet your criteria, negotiate with sellers, and guide you through the buying process. If you don’t have time to deal with multiple agents, then work with a Buyers Agent service.
What you want is an agent who has experience working with military buyers and who understands your unique needs and challenges. And ideally work with someone who specialises in investments and knows regional and local area market conditions intimately. The Capital Properties Buyers Agent service will help you find your ideal property and negotiate the lowest price and settlement with ease.
Next, you’ll need to find a great Property Manager who will manage the risks associated with tenancy and landlord agreements. From screening tenants and carrying out routine property inspections to make sure your investment is in great hands.
Don’t forget you’ll also need a professional Mortgage Broker, Accountant and Financial Planner. And if you’re building, you’ll need a Conveyancer or Property Lawyer, Quantity Surveyor and of course a builder that you trust.
Consider the location
You already know that one of the most important factors to consider when buying property is the location. As a member of the ADF, you may be stationed in different locations throughout your career, so it’s important to think about the long-term prospects of the area where you’re buying.
You’ll want to look for areas with strong rental demand, good infrastructure, and a diverse range of employers. Renters also want access key amenities such as schools, shops, and public transport. Right now the number one property driver is lifestyle – we’ve written about what renters and buyers are looking for in this post “Lifestyle and the property decision making process”.
Think about the property’s potential
When buying property as an investment, it’s important to think about its potential for growth and rental income. Look for properties that are in good condition and have the potential to be improved with upgrades or renovations in the future.
For most investors it’s key to have a property that starts delivering a rental yield immediately. It’s important to identify your ideal tenant and cater for their needs. Think about the number of rooms required and look for properties with features that will appeal to those tenants such as air conditioning, off-street parking, and modern appliances. The ADF property buyer checklist is a handy quick read to help with making some of these decisions.
Book a building inspection
Before you make an offer on an established property, it’s important to get a building inspection. This will give you a clear idea of the property’s condition and any issues that might need to be addressed. A building inspection can also give you leverage in negotiations with the seller. If the inspection reveals issues that need to be fixed, you can ask the seller to reduce the purchase price or fix the issues before you settle. Our blog post “Why use a building inspector when constructing” is a great read to clarify how a Building Inspector will help.
Brush up on your negotiation skills
From securing finance to the purchase of the property, finding the right tenants, dealing with maintenance/construction and so on, you’ll need to be prepared to negotiate confidently. If you don’t have the time or the expertise to negotiate effectively, then we recommend you work with our buyer’s agent services to negotiate expertly on your behalf instead. Working with professionals will ultimately save you time, stress, and money.
The Capital Properties free Discovery Session will guide you with everything you need to know on how to buy well for effective property investment.
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