Buying Your First Investment Property? Start With the Basics
It's easy to get distracted by renovation potential, impressive finishes or promises of future growth. For a first investment, keeping things simple can make it easier to assess the opportunity objectively. Start with the numbers, understand tenant demand and look closely at the property you're actually buying.
Make sure the investment stacks up
Before getting attached to a property, look at the fundamentals. Consider the expected rent, rental yield and the ongoing costs involved in holding the property.
Then give yourself some breathing room. Modelling repayments at a higher interest rate can help you understand whether the investment would still feel manageable if conditions changed.
✓ Rental yield
✓ Vacancy rate
✓ Loan repayments
✓ Council and water rates
✓ Insurance
✓ Strata costs, if applicable
✓ Maintenance allowance
✓ Cash flow buffer
Think like the person who might rent it
A property can look like a great investment on paper, but somebody still needs to want to live there. Consider who the likely tenant is and what matters to them day to day.
Look at what you're actually buying
Future plans and projected growth can sound attractive, but your decision still needs to make sense based on the property and market you're buying into today.
Don't inherit somebody else's money pit
Maintenance is part of property ownership, but understanding the condition of the asset before you buy can help reduce unwanted surprises. An independent building and pest inspection can form an important part of your due diligence.
Look beyond the apartment
If you're considering a unit, townhouse or another strata property, your due diligence should extend beyond the condition of the individual residence.
You don't necessarily need a major renovation
A clean, well-maintained property with good natural light, airflow and practical finishes can have broad tenant appeal. Sometimes simple improvements are all that's needed before a property is ready for the rental market.
Broad appeal can be valuable
Think about the type of tenant likely to rent in the area and whether the property's layout suits them. A practical two-bedroom property with a bathroom and car space, for example, can suit a broad range of renters in many markets — but local demand should guide the decision.
Understand the benefits. Don't rely on them.
Tax considerations and depreciation may form part of your overall investment strategy, but the property should still make sense without depending on a particular tax outcome. Speak with a suitably qualified tax professional about your individual circumstances.
Think about management before settlement
Buying the property is only the beginning. Tenant selection, routine inspections, maintenance coordination and communication all become part of protecting and managing the investment.
Before you make an offer
✓ Research local vacancy rates
✓ Calculate total holding costs
✓ Stress test your repayments
✓ Research tenant demand
✓ Look at surrounding supply
✓ Arrange building and pest checks
✓ Consider immediate maintenance
✓ Understand the likely tenant
✓ Allow a cash flow buffer
✓ Speak with your professional advisers
Stick to the brief, the budget and the data.
Your first investment doesn't need to be the property you'd personally choose to live in. What matters is whether it fits your strategy, your finances and the needs of the local rental market.
Start with a clearer shortlist.
If you'd like to talk through Central Coast suburbs, rental demand or what to look for in your first investment property, the Brand Property team is happy to help.
Talk to Brand Property