Thinking of investing in property for the first time? Read out checklist guide for first time investors to find out what you need to know before you buy.
There are a lot of things to consider when you’re buying your first investment property. Here’re some key questions to tick off your to-do list before you buy.
Have You Researched The Location Thoroughly?
Buying in an area with good potential for capital growth, where you will also be able to achieve good rental returns, is critical to making a sound investment. Look for areas that have appealing fundamentals, such as access to public transport, parks, proximity to the CBD or good schools.
Research vacancy rates in the area – low vacancy rates are a good sign that it’s a desirable area, whereas high vacancy rates should raise alarm bells and may make the property harder to rent out. Find out what properties in the area have previously sold for and what current rents are for similar properties. There are a variety of factors that affect rental yields.
You should also contact the local council and make sure that you know about any future changes in the area which may affect property prices, such as rezoning or major new developments or infrastructure.
If you do have some uncertainty, an experienced buyers agent may be a consideration to help you buying the right investment property in the right place.
Does The Building Tick All The Right Boxes?
Consider what type of features you want the building you’re buying to have. Has the structure been checked out professionally to make sure it doesn’t have issues such as building defects or newer problems like flammable cladding? Is there a car park? While extras such as pools, gyms and building managers in apartment blocks can help attract tenants, you will also be paying higher strata fees to fund these. To keep your costs low and profits high it may make more sense to look for a solidly built, no-frills building that is not in need of any major repairs. Make sure you get building and pest inspections done and have your solicitor or conveyancer review strata reports.
Do You Understand Your Responsibilities As A Landlord?
As a landlord you will have certain legal obligations and responsibilities around matters such as rent increases, fair trading, the bond, safety and security, repairs and accessing the property. Read more about your responsibilities as a landlord here.
It’s also important to be aware of rules and regulations in your state, such as the NSW Residential Tenancies Act. Employing a professional, experienced property manager can help keep you up to date with any new laws or changes and on top of your responsibilities.
Can You Claim Depreciation?
Most first-time investors don’t know to consider depreciation but it may help save you money. The ATO allows property investors to claim deductions for depreciation on their property against their taxes. To claim depreciation, you’ll need a Tax Depreciation Schedule (also known as a Capital Allowance and Tax Depreciation Schedule or Quantity Surveyors Report or Rental Property Depreciation Report). This document is typically prepared by a professional Quality Surveyor and outlines in detail the deductions you can make as an investor for the depreciation of the property.
Do You Have Landlord’s Insurance?
While it may seem like an unnecessary extra cost, here’s why you need landlord’s insurance for your investment property to protect yourself and your asset.
How Will You Attract Quality Tenants?
How best to advertise your property and attract the right tenant is something worth considering before you buy, so that you can quickly find a good tenant upon settlement (if you don’t already have one). Your property manager can help you sort out effective advertising strategies. They’ll also know how to make your rental property stand out in a tough market and can screen tenants properly for you.
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