Investing in property for the first time can feel daunting. If you make the right choice, your investment property can provide you with a second income stream for life. Poor decisions, on the other hand, might see you taking on overheads that you can’t manage without stress.
Tony Trpeski, Principal of Peter Blackshaw City and Inner North, has helped many first time investors over the years. He shares his tips below.
1. Crunch the numbers
“The first thing we always ask first time property investors is how much of their own money they’re prepared to invest each week in order to own a property”, says Tony. “Once they know how much they can afford to contribute from their pocket, it helps to establish their budget for a property”.
Tony explains that when you first purchase a property, you may be sitting in the negative. Costs of an investment property could outweigh the income you receive each week. For an average investment property, Tony says you should expect to be a little bit out of pocket: usually somewhere between $50 and $100 a week is standard.
However, there are some investment properties where the costs are less than the income you receive, generating a positive return.
Tony suggests first time investors do their own calculations and research. Knowing the difference between gearing and cashflow is important, as it will help you to determine where you sit at the end of a financial year. Cashflow is your financial position week to week, where gearing is where you sit financially after-tax time. A property with a negative cashflow could still be positively geared once tax is returned – it’s important to understand how this works to calculate your finances correctly.
2. Consult the professionals
“The important thing is to align yourself with an agent or agency before you go to market”, Tony advises. “That’s important because if you want to be smart, it’s useful to have all your questions answered before you’re out there bidding on a property or signing a contract.
It also avoids a lot of competition. Canberra is a tight market, and a good property in a great location is going to attract a lot of interest.
As real estate agents, we maintain good strong databases. When we list a property, the first thing we do is to talk to prospective buyers who have already built a relationship with us and let them know. They get access to a quality investment opportunity before anyone else.
First time investors should find a qualified agent who’s really active in their desired area and talk to them about what they’re looking for.”
Tony also suggests consulting a financial professional prior to taking the plunge. Some people plan to make renovations to an investment property, it is important to understand what you can and cannot claim before buying somewhere that you plan to renovate.
3. Choose a location with general appeal
Tony also advises buying an investment property with a cool head. “What we find is that when people are buying an investment property, they buy where they want to live”, he explains. “From an investment perspective, it’s a better strategy to look at where other people want to live, because it might not be the same suburb. A desirable location attracts good quality tenants.
If you’re a first time investor, look at the rental demand in various areas, look at places where there are town centres, employment opportunities and recreational facilities.
4. Inspect what you can
First time investors might feel nervous about buying a property off the plan rather than one that’s already built, but Tony is happy to reassure them that it’s not necessary.
“I always recommend spending time driving around the area to get a feel for it”, he says, “but technology is a great thing.”, he says. “We use VR on a lot of our projects to give buyers a good idea what the property will look like.”
Tony explains that Canberra has a very strong culture of buying off-the-plan, which means buyers will know what developers have good reputations and build excellent quality homes.
If you are wanting to see the quality of build and finishes by a developer, Tony suggests asking to see a previous project by the same developer. This will give you an idea of the final outcome and the confidence your property will be of the same quality.
If you’re considering your first investment property, find out how your local Peter Blackshaw agent can help.