Tips for buying investment property in Australia

Tips for buying investment property in Australia

Planning and research

Take the time to plan your property investment and don't rush into anything. Make sure you research the area you're interested in well by reading property articles, get information online and through reputable property research companies such as propertyDATA.com.au. Find out the area's average rental income, property price growth both past trends and forecasted, and what infrastructure is planned.

Long-term strategy

Make sure you're ready to commit, as investing in property is generally a long-term strategy. You need to be aware that unlike other types of investments such as shares, you can't just sell part of it if you're short for cash at the time.

Location

Consider the suburb the property is located in. It's preferable to buy a property in a safe, clean area with low crime rates, and in an area which has a high rental demand. Find out the proximity of local transport, supermarkets, schools, shopping centres and how far it is from the city centre. Being close to these amenities will make the property more attractive to potential renters. The location will also determine the type of tenants you'll attract find out the demographic of renters in the area you're looking in.

Type of mortgage

Choose a mortgage type that suits your lifestyle. There are many different options available so find out what's out there and get advice from a financial advisor. Find out what part of the loan is tax deductible interest on an investment property loan generally is, however borrowing costs aren't immediately deductible. Knowing the difference is important and will affect whether your investment is negative or positive gearing.

Negative or positive gearing

Negative gearing means the cost to maintain the investment including loan repayments and fees, outweigh the income produced. This will lead to a reduction in taxable income.

On the other hand, positive gearing is where the income produced is greater than the outgoings which can mean potentially high rental yields. Get advice on which type of gearing will produce the highest returns for your investment.

Vacancies

While there is a large percentage of people who rent in Australia, you need to ensure you're able to cover the mortgage repayments and other associated costs of your investment even if it's vacant for some time. It is therefore important to have a cash buffer readily available.

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