How do I choose the right investment property?
When investing in property it is important to do your research to find the best return on investment. There are a number of things to consider when deciding which property is best for you. The include:
Location
Where your property is located will impact on rental demand and rate of return as well as quality of your tenant. If your property is in an in demand location you should also benefit from capital growth. We recommend looking for an investment property in a sought after area with a rising population, close by to public amenities with good access by public transport.
Property condition
We recommend to conduct a complete home building and pest inspection. If you are surprised by repairs and maintenance it can make or break your investment property. Ideally try and find a property that is ready for tenants to move straight in.
Vacancy rate
Avoid an area that has a high property vacancy rate. A low number of available rental properties in the area indicates strong rental demands and higher rental prices.
Cash flow
Ideally, your new investment property should generate strong regular positive cash flow. This means after all repayments and expenses, you have a positive return every month.
Capital growth
Look for a property in a high demand area as this will increase the capital growth of your investment property. It is also important to not over capitalise or over spend on renovations or repairs early, it may effect the return you receive if you ever deiced to sell the property.
Why is investing in property a good idea?
Stability
Properties are always in demand because people always need somewhere to live. Unlike other investment options, the property market is less likely to be impacted by market shifts and provides a fixed return.
Cashflow
An investment property can generate a steady stream of revenue through rent. You can use the rent payments to pay the mortgage and expenses as well as generate passive income when your rent payments outweigh the expense of repayments and maintenance.
Tax Benefits
Residential investment property owners have access to a range of tax benefits that assists them in maximizing their return on investment.
Capital growth
When you are able to maintain your investment for an extended period you can benefit from the value of your investment property increasing. This in turn provides you with equity to increase your property portfolio.
What are the negatives of property investments?
Liquidity
If you need cash in a hurry, it takes longer to sell your property than other investments like shares. Refinancing or accessing equity, if you don’t have the appropriate investment loan features can be a drawn out process.
High initial costs
The cost to purchase a new investment property hinders some investors to consider other options. The trouble of financing, deposits and other up front costs such as stamp duty can deter potential investors.
Regular costs
There are a number of regular expenses that you need to consider when investing in property. Loan repayments, renovation and maintenance and insurance costs need to be considered when investing in property.
Tenants
We recommend that you find a reputable local real estate agent to review and recommend potential tenants to endure that your return on investment is consistently supported.. Bad tenants can end in financial loss if they regularly fail to pay rent on time or cause damage to your investment property.
What's the Yellow Line?
An investment property is a smart way to create wealth and long tern cash flow. It is important to ensure that you make the right choice in investment loan to maximise your return on investment.
Obtaining construction loans for investment purposes is a great way to be able to purchase in new and upcoming suburbs with home and land packages as well as in established suburbs where building an investment property is your dream.
Buying a home is likely to be the largest financial decision you will make. There are a vast range of products and banks are extremely competitive. It is best to seek professional financial advise to ensure you obtain the most appropriate home loan product for your needs.
Yellow loans has a vast range of lenders with a range of products to achieve the best results on obtaining the best home loan deal for you. You can contact us here and we can get your future looking bright.