Last Updated: 25th November, 2021

An investment property is an asset that can help grow your wealth over the years. Investing in a property can be very exciting, especially for first-time investors. However, choosing the right investment property is crucial because making a mistake can be costly – and not just financially. Here are seven factors to consider when choosing the right property for your portfolio:

What is the best location of the investment property?

The location of your investment is the most critical factor in choosing the right investment property. The best location for you depends on what you hope to achieve with your investment. Before buying a rental property, think about what your goals are for your investment property. If your goal is good capital growth, emerging suburbs should be your target. These suburbs are generally in areas close to the CBD in a capital city or overlooking the beaches. On the other hand, if your goal is to seek a good rental return, you should look into desirable features for tenants, such as a swimming pool, garage, school, shopping centre or park. The renters in different parts of Australia have different demands; for example, many renters in Melbourne prefer being near transport facilities, but renters in Perth prefer to drive and have a garage. You need to choose a location in a market you’re familiar with. Get help from a buyer’s agent who has intimate knowledge of the area you’re considering before you make your decision.

What is the condition of the property?

Always work with an independent pest and building inspector to get a detailed report about the condition of the property you’re considering buying. When buying an old property, you usually need to set aside some funds for renovations and repairs. The best thing about a property that isn’t in ideal condition is that you can buy it for much less than the average property of the same size. In properties like these, a minor renovation could add significant value. On the other hand, if the home needs significant remodelling or restructuring that you can’t handle yourself, the cost may eat away what you saved on the price. So, choose wisely.

Do I invest in a new unit or buy an established property?

Investing in a new unit and buying an established property both have their own benefits; however, most investors prefer established properties to new ones. By buying an established property, investors benefit from:
  • Getting tenants immediately to start earning rental yields
  • Having a property close to a CBD, as most newer properties are situated on the outer suburbs, due to unavailability of land.
  • Data such as comparable sales, vacancy rates, demographic profiles and types of tenants that the place attracts will be available.
Investing in a new property can have the following benefits:
  • Choosing an investment property that has modern amenities and smart appliances that tenants want. This may help you attract a tenant who is willing to pay a premium.
  • Tax write-offs and depreciation benefits. You can get tax breaks on rental advertising costs, council rates, and land tax.
  • Lower maintenance overheads. Everything in a new property is under a builder or appliance warranty. That’s why there are lower maintenance costs compared with older properties.

What are the costs of buying an investment property?

You must be aware of the various costs associated with buying an investment property, such as:
  • Stamp duty
  • Conveyancing fees
  • Legal fees
  • Search fees
  • Pest and building reports
  • Council and water rates
  • Land tax
  • Property management fees
  • Repairs and maintenance
  • Agent fees
Whether an investment property is worth its price can be often determined by the associated costs. You can use our property purchase costs calculator to work out an accurate estimate.

When is the right time to buy an investment property?

The first step is to be sure you’re in a good financial position. Having a bigger deposit will definitely help you obtain an excellent deal on your mortgage. But if property prices are growing quickly, and you wait to save a deposit, the price may become out of your reach. In a growing market, the right time to invest in a property is right now. This is because the cost of Lenders Mortgage Insurance (LMI), which you have to pay to obtain an investment loan worth more than 80% of the property value, is typically much less than the price of a property will grow while you’re saving a larger deposit. However, if the area you’re looking to invest in isn’t increasing in value at the moment, you can delay your purchase until the market picks up. You can save a decent deposit until then. Make sure you stay aware of the latest property market trends to decide the right time to buy an investment property.

How can I find good information about a property?

Whether you’re thinking about buying or selling a house, a property report will put you in a stronger position to negotiate the property price. A property report gives you an idea of how many times the property has sold and at what price. Based on the previous prices and comparable sales in the area, you can determine whether the asking price is reasonable. You can then decide what offer to make. A property report can save you hours of research and helps you make an informed decision. However, an online property report may not always be accurate. If there is no recent activity in the area or the property you’re considering buying needs a major renovation, then the property report can lead you astray. That’s why you need Home Loan Experts’ team of expert mortgage brokers, who can not only provide you with free property reports but also help you estimate the value of a property.

How to choose a mortgage broker who can help

A good mortgage broker can be as much of an asset as the property in which you’re investing. With extensive experience working side by side with investors and lenders, Home Loan Experts’ brokers can help you narrow down your investment options based on your situation. We can also help get you pre-approved for an investment loan and then help you get your financial details in order to secure formal approval. To speak to our award-winning mortgage brokers, just give us a call on 1300 889 743 or fill in our free assessment form, and one of our expert brokers will contact you right away.