What novice investors need to know about buying a rental property

Property investing, like anything people hope to master, demands learning some ‘ABCs’ in the early stages. Once these fundamentals are ticked off, the pathway to building a real estate portfolio will almost always be smoother. Here are 5 critically important things to commit to memory.

1. Know why you are doing this and what you can afford What do you want to achieve by investing in real estate? What are you short term, medium term and long term goals? How much can you afford to spend?

Make sure you are crystal clear about why you are investing in this asset class, including your specific requirements (i.e. rental return/financial goals).

Critically, you need to understand your buying budget and the holding costs involved, such as strata levies, water and council rates, insurance and management fees.
Lastly, always seek pre-approval on your finance before shopping around and making offers.

1. What do you want? Will it be a metro or regional property? A house or an apartment? Do you need a specific level of rental income to cover costs? Do you want a property you can improve with cosmetic and/or structural renovating?

Are you seeking capital growth or rental income – or both? Which suburbs or areas are you interested in and why?

1. Research, research, research If you haven’t already been keeping an eye firmly on the market, now is the time to get cracking.

“Study recent comparable sales and check out current listings and prices in your selected suburbs,” said homes.com.au Founder & Managing Director, Pat Carbone.

Speak to local agents. Let them know what you are looking for so they can keep you in mind if suitable new listings come up. Ask them to put your details on their buyer database.

Also, consult the local council about planned developments that might impact the suburb/s you’re investing in.

If you can, visit your target areas at different times of day. Is there much noise? Are there parking problems on the street? Does the neighborhood appear friendly?

1. Scrutinise supply/demand and watch for properties with a twist Property values tend to rise more over time in areas with less supply than demand. With this in mind, keep a keen eye on how long listings are taking to sell.

Find out if there are any housing projects planned, as this will bring a lot more supply to the area. If you are planning on holding your property for the long term, this might not be a deal-breaker. But it is important to get a feel for your chosen location’s housing stock and levels of demand (both buying and renting) to ensure this supports your goals.

Also, keep your eyes peeled for properties in your price range with unique features, as this increases overall appeal and investment value.

For example, if you buy an apartment on the desirable north east corner of the block – so it has the best aspect possible; and it has a bigger floor plan than is standard for the area, you will always have an edge over competing rental stock and stock for sale when selling.

Other unique features that place a property above the rest include water views, close proximity to parks, shops and transport, ample street parking and sought-after school catchment zones.

1. Get your team in place Finally, before buying it is wise to line up a trusted legal expert, building inspector, accountant and if necessary, a buyer’s agent to negotiate with the selling agent on your behalf.
This way, your A-team can swing into action as soon as you find the right property to buy.