Investing in real estate can be daunting, especially if you've never done it before. Many people don't know where to start or how to navigate the process.
If you're looking to invest in a property for the first time, there are some key points to bear in mind when making an informed decision.
The most important thing to note is that property prices can go through huge swings, so it's always best to check out what's happening in the local area before investing.
Below are more tips for first time investors that will be useful as you continue to build your real estate portfolio.
There are many different types of property investments available today, ranging from commercial properties to residential homes. Each type requires its own skill set and knowledge base.
It’s not enough to just pick a suburb and start buying houses. You need to understand the property cycle, the different types of properties available and why certain areas will outperform others.
You also need to understand how the property market works, including the impact of interest rates, population growth, demographic trends, economic cycles and government policy.
Feel a little bit intimidated by all these? Check out our own library of resources to help you get started.
In general, investment properties require a higher deposit than owner occupied properties. If you already own your current residence, you might be able to get a mortgage for an investment property.
Ideally, you'll need to save at least 20% of its purchase price before you even think about buying. This is so you can avoid paying Lenders Mortgage Insurance (LMI).
When buying real estate it’s important to understand your personal financial situation. Ask your mortgage broker to give you an estimate of what you can afford to pay each month on your mortgage.
Make sure you have enough money saved for rates, insurance and other costs related to owning an investment property. When buying your first property, try to keep an eye out for potential problems before they become big ones.
For example, make sure all your plumbing works well, check if there is any mould growing inside your walls and ensure your roof is sturdy enough to hold heavy rainwater. A building and pest inspection is just as important for an investment property as it is for a home you plan to live in.
Finance pre-approval allows you to buy at auction with less risk. You’ll get an idea of what your monthly repayments will be, and whether you can afford them. Some lenders will even give you a rough idea of the interest rate you’ll end up paying.
A pre-approval also helps you get ready to move forward with your purchase. Even though you may not own the property yet, you can start the process of applying for a mortgage. Pre-approval generally lasts 90 days before you have to re-apply.
You should consider whether you need rental income or capital growth, or just want to buy another home for yourself or family. Also decide on who owns the property and determine whether you want to be an individual, partnership, company, or trust owner.
It might also be a good idea to check with your local government before making any purchases since each state has its own laws regarding registration, licensing and land titles.
Before making any offers or promises, get all the information you need about the property. A building inspection will give you a clear idea of what needs fixing, while a pest report will tell you whether there are any issues with pests.
Combining both inspections gives you a complete picture of the property. You can then compare this against other properties you’re looking at.
This tip is going to come in handy when buying rental properties. Location is important when buying any property. You may choose to buy a house in the city because you want to live there yourself, or you could buy an investment property that will increase in value while you rent it out. Location also affects the price of the property.
Consider buying a property near public transportation stations, restaurants, tourist attractions, universities and schools. These areas will be more attractive to tenants because they'll be easier to access.
Investing in real estate is a high risk, high reward kind of deal. So it is better to have an expert on your team to help you make all the best financial decisions in your investor’s journey.
Get in touch with the mortgage specialists at Pivotal Financial on 07 3007 9088 or through email at email@example.com.