Frustrated with the buying process? It can be really tough buying in a market that is overheated. You really need to stay positive and as long as you have a written plan in place you should be able to stay on track and not get caught up in the feeding frenzy. Last week we shared with you our first Tip on Buying in a Seller’s Market.
Today our next Topic is about ‘Choosing the Right Property’. Now obviously this will depend on whether you are buying a home for yourself, or an investment property. So to ensure we don’t leave anyone out, we’ll cover both.
Top 3 Tips on Choosing your next Home
1. Location – If timing is an issue, you cannot afford to limit yourself to one specific location. If you followed our Planning advice from last week, then you should have a number of areas to look in based on levels of preference. Do your research first to make sure you are not looking in an area that has a median house (or unit) price in excess of your budget. Time is money, especially when searching for property. If a convenient, family lifestyle is important to you then check out the reputation of local schools, sporting clubs and day care centres.
Similarly if you are young and single, then a carefree, more social lifestyle will appeal to you, so look at access to transport, gyms, cafes and restaurants. Location is very much a personal preference, however do keep in mind that you will one day be selling.
2. Condition – If you are a DIY’er, then you may be happy to buy something that is a little outdated or in need of some TLC. You may find less competition when it comes to securing a property that needs a fair bit of work. These days the majority of people aren’t keen to spend the time or extra money required to do it up. If you have the expertise to visualise how spending a few thousand dollars could dramatically improve a property’s appeal, then you’re sure to find a property with potential. Just make sure you factor the cost of improvements into the price you are willing to pay and don’t become too emotionally involved. However, if you’re looking for something that is already done so you can move straight in, then chances are so is everyone else. This is where you may need to compromise – a lot! I know I did. I went from looking for a turn key property, to buying a complete knock down and re-build due to being priced out of the renovated houses market.
3. Construction – Good construction and quality building materials are essential when buying new. Most new builds look great for the first 12 months, however if they’re poorly constructed, you can bet they will begin to prematurely age after about 5 years. When buying brand new, whether a house or apartment, ensure you research the builder to ensure the construction is sound and that cosmetic features aren’t in place to hide low quality workmanship. A great way to do this is to inspect other developments from the same builder which have come back onto the market a number of years after first being completed.
Now for our Investors….
Our Top 3 Tips on Choosing an Investment Property
1. Location – When choosing an investment property, most people don’t look any further than their own backyard. This can be a big mistake especially when there are other prospects out there possibly in the next suburb or even interstate, showing a far greater return on investment. Once again it pays to be flexible and to do a significant amount of planning and research before you leave the front door. Reading investment magazines is a good start to get an insight into what’s happening both locally and nationally, however you must keep in mind that the information is usually outdated by at least 1 or 2 months. Access to property information sites such as RP Data or even domain.com.au will usually allow you to carry out enough research to get you started. From there, it is really up to you to monitor the market and keep records of what’s selling and for how much. There are many factors to take into consideration when choosing a good growth area, such as changes to infrastructure, gentrification and increasing wages to name a few.
2. Condition – When buying for investment purposes, it’s usually a safe option to buy something that is in either very good condition, or relatively new. The better the condition, the easier it will be for you to find a good tenant. You can also rest assured that the amount of money needed for repairs to a new property will be minimal – at least for the first few years. Alternatively if you’d like to add some value, try buying a property that is slightly rundown for a good price, and just a few minor cosmetic improvements will enhance the rent potential as well as the sale value down the track. Renovations carried out with a view to rental can be claimed as a tax deduction and most items depreciated. Don’t forget to have a Depreciation Schedule done for the property before you start the renovation as well as upon completion. This is an area most investors forget about, however is critical to your final tax position. Speak to your Accountant for their advice.
3. Type of Property – This all comes down to budget and location. If you can afford a house, then you will usually find that capital growth prospects and potential rental returns are higher for houses. There are no strata fees to pay and you can do what you like to the property – within reason – without worrying about approvals from body corporates etc. You need to keep in mind that the tenant is responsible for maintaining the gardens etc, so don’t go for a property with a pool or high maintenance gardens. If your budget is more in the unit price range and especially if you’re just starting out, it’s better to go for apartments in a smaller block. For one thing you will have less competition when it comes to lease or sell, and secondly many tenants and potential buyers prefer the boutique appeal smaller blocks provide. You will also have lower strata fees which is great news for your cash flow.
Finally, NEVER purchase a property sight unseen. This is major recipe for disaster. You may think this sounds absurd, but I know plenty of people who have done just that only to be disappointed that the property looks nothing like the photos on the internet!
Choosing the Right Property is an incredibly important part of the process. Get it wrong and you may live with regret for many years. At Innovative Property, our Buyer’s Advocacy service helps you make the right choice, and give you peace of mind during the process. If you’re struggling to find a property that meets your requirements, give us a call. We will do everything in our power to find the right property for you – even if it means knocking on doors! Call us today – 0411 522233.