If you are looking to purchase your first investment property, you probably have one major hurdle to overcome: making decisions as an investor instead of a home buyer. Here are some tips to help you transition from home owner to small investor.
Keep Your Distance
Do not buy an investment home in your own neighbourhood. This keeps you from doing your due diligence and finding the optimum location. Also, you don’t want your tenants living so close that they can knock on your door at 3:00 am about a leaky toilet.
Fit Out the Property for Your Ideal Tenants
Figure out who your ideal tenants are. For example, you may decide that a young family with two small children is a great demographic. Then, fit out the property for a small family. Remember that your personal tastes probably aren’t those of your ideal tenant. We will mention this later but it is also important to match location to your ideal tenants.
Location, Location, Location
Besides buying investment properties in their own neighbourhoods, the second most common mistake made by amateur investors is to buy an investment property where they vacation. This seldom works out well.
Instead, do your due diligence on location. Buy in a suburb that is poised for long-term capital growth. Make sure your investment property has access to amenities and infrastructure such as transport, shopping, medical facilities and schools.
While choosing the correct location, be sure to check vacancy rates. Every day that you don’t have a tenant costs you money. The standard “rule of thumb” is to look for neighbourhoods and suburbs with vacancy rates of less than 2.5%.
This will make or break your first investment home. You must calculate an accurate projection of the total costs for your investment property. This includes but is not limited to: taxes, fees, interest, stamp duty, repairs, maintenance, upkeep and property management fees.
Treat It Like a Business
Do not become emotionally attached to a property—buy with your head instead of your heart. This can prevent you from overpaying for a property.
Find the Right Mortgage Broker
The right home loan can save you thousands of dollars. For a home loan in Rockingham, Baldivis or Kwinana, call 0408 912 244.