Over the years we’ve fielded many questions about property. While we try our best to answer with all questions in relation to the legal process of conveyancing, we get a lot of questions sometimes about things like price, location, and whether the property’s a good investment.
Unfortunately we can’t tell you whether your purpose will be a good investment or not – that’s something that you or your financial planner should figure out – but we can tell you what to consider when you are thinking about purchasing investment property, such as:
- Consider your alternatives. While we’ve noticed that property investment is really popular lately, there’s always other ways how you may invest your money.
- Consider the type of property. Property investment isn’t just limited to residential property. There’s also offices, retail property, and other commercial properties available.
- Consider what the initial costs would be. These include conveyancing costs, stamp duty, as well as other lending or broking costs.
- Consider what the on-going costs would be. These would be things like land tax, council rates, water rates, strata levies, maintenance costs, insurance, as well as mortgage repayments. Be realistic and don’t skimp out, especially with maintenance costs.
- Compare these on-going costs with what you would likely yield in rental. Take into account that you might not always have the property tenanted, and you may not always get the rental yield you want.
- Take into account likely changes in the interest rates.
- Consider the rate of capital growth of the property by comparing it to the rates in the suburb that the property is in.
- Get tax advice about your proposed investment.
- Always have an exit strategy. An investment is just that – an investment. It’s not an investment if you hold on to it and not sell it. It’s not an investment if you plan to have it as a second home. Always consider that you’ll end up selling it when the time is right. Plan for when that timing is – or plan for how to dispose of it if it’s not working out.
Ern, our principal, has previously written on this subject, and given some very valuable insight into this. That being said, good luck, and happy hunting!