Investing in property? You’ll need these tips

Investing in property in Sydney is a huge opportunity, but not one that can be taken lightly. Getting it right could ensure you have a long-lasting asset that grows over many years – though getting it wrong can become a real headache.

With that in mind, we’re here to help ensure you in the first camp! These are our tips for buying, and managing an investment property.

Tips for buying an investment property

Look for growth potential

Generally, investing in property is about securing a long-lasting asset that grows in value over time. That way, by the time you sell it later, it is worth more than you paid for it. Goodbye mortgage, hello exotic holiday.

But, predicting growth isn’t easy. While you can’t see into the future, you can look for these factors to tell if a property might go your way:

Check property reports to see how median house values in an area have changed recently. Past performance doesn’t equal future performance, but it’s still a factor.
Check the local council’s website for any upcoming infrastructure or amenities projects.
Check for availability of employment opportunities, or transport links to common places of employment.
Investigate public transport links, or transport links which are in development.
Look at zoning restrictions. What can you do with the property, and what can people do around you? Is your investment at risk of someone nearby building a monstrosity?
Ask a real estate investment expert – it’s their job to have their ear to the ground, after all.

Try to make evidence-based decisions

When doing your research, look for numbers such as:

Median sale price over time – that’s the average price of homes in an area over time. See if it’s gone up or down.
Rental yields – that’s the annual rent money a property generates.
Vacancy rates – that’s the time your investment may spend unoccupied.
Ratio of owner-occupiers to renters – that’s the number of people who own their home in an area versus renters. Generally, you want more home-owners than renters (general guidance goes that they’ll better look after their properties, which could help property values).

And where do you get this info? Search online for ‘property reports’ in particular suburbs, or ask an expert.

Identify your target audience

Your ‘target audience’ is who you want to rent your investment property to.

This will help you define what type of property you want to invest in, and where that property needs to be. For example, you aren’t likely to get many student tenants if your property isn’t near a university.

Similarly, defining your preferred tenants may help you choose whether you want long-term stayers or short-term stayers. Short-term stayers are generally willing to pay higher rent, but long-term stayers can be more stable.

Think beyond mortgage and rental income

It’s easy to get carried away thinking you’re going to get passive income because your expected rental income exceeds your projected mortgage costs. But, remember that the total cost of owning property is much higher than just mortgage repayments alone.

You also need to think about:

Land tax
Stamp duty on the purchase itself
Cost of property inspections prior to the purchase
Insurance
Putting aside a maintenance budget for future emergencies
Any agent or property management fees
Strata fees, if applicable
Vacancy periods, where the home isn’t generating income
Council rates

It’s possible that, all these factors combined, your property might not make a passive income. But remember, if the value of the property grows over time then you could profit on capital gains in the future.

Try to reduce your investment costs

Investing in property isn’t cheap, but there are a few ways to bring that cost down. Generally, the more you can get for less, the better off your investment portfolio will be – at least so goes the theory.

So, to bring investment costs down, consider:

Shop around lenders to secure the best mortgage rates possible. Doing extra work here could save thousands of dollars over the next few years.
Try to avoid high-maintenance properties, such as very old properties or properties with prior damage, unless you’re confident you can foot that bill.
Try to avoid properties with high strata fees (again, unless you feel confident the capital gains will counterbalance the costs).
Stick with what you can afford. If you saddle yourself with too much debt and then get stuck with prolonged periods of vacancy, you may struggle to manage your investment.

Learn more: Vital Home Maintenance Tips for Every Season

Tips for managing an investment property

How to set the right rent

It is generally expected that the rent you charge will be on-par with the common going rates in that area. So, you might look up the median weekly rent for your street or suburb and decide whether to choose at about that level, or slightly higher/lower (depending on what you think your property is worth).

How to choose good tenants

Choosing suitable tenants is as much about doing your research as it is about gut feel. The research part can help you identify if someone ticks all of your boxes, while gut feel helps you understand if this will be someone you actually enjoy dealing with.

Here are some tips:

Meet potential tenants in person, to get a ‘vibe’ for what they’re like.
Ask people why they’re moving home, as this may yield valuable information (i.e. they say they only want to stay for a short period, but you’re hoping for a long-term stayer).
Try to put everyone through the same interview process, with the same paperwork, so you can compare like for like.
Verify tenants can pay their rent on time by asking about their income, checking their credit history and contacting references.

Hire an expert to do it all for you

The reality is, owning and operating an investment property is a lot of work. Most people just don’t have enough hours in the day to actually do it properly (especially all the tricky legal obligations), which is where a property manager could help.

So what can a property manager do?

Advertise for tenants and run open homes, then shortlist and select tenants.
Handle paperwork, lodge the bond and negotiate the finer details.
Inspect the property for issues throughout a tenancy.
Stay on call for emergencies, and organise emergency repairs.
Mediate disputes, and advise on property-relevant rights if issues escalate.

Need help? Contact the experts

Here at MattBlak, we’re the experts on all things property in the Sutherland Shire area. It’s our philosophy to minimise risk as much as possible for our clients, while maximising their returns with a transparent service, the latest technology and many years of experience.