We don’t all earn the same amount of money each year. Some of us may earn $120,000, while others may earn $50,000. But, earning less than someone else doesn’t mean that you cannot invest in property. What is does mean is that you have to look at what you can and cannot afford to buy, and to then buy smart.
Regardless of income, it’s important that you consider your own financial position and circumstances before buying an investment property, and that you buy within your means. If you don’t then you can risk losing your investment property and possibly any other assets that you own.
In order to buy an investment property within your means you need to consider your other financial responsibilities and make sure that you can afford to meet these, as well as cover the costs of your investment property. Therefore, before you buy, make sure you do your sums.
Pay off your home – Most property investment experts recommend that you’ve paid off your principal place of residence before you start buying investment property.
Save a sizeable deposit – Look to save at least 20 percent or more of the purchase price of your investment property. You also may be able unlock the equity in your home to finance an investment property.
Always research before buying – Know your suburbs. Read as much property data as possible and continually research the market to find ‘hotspots’ that represent high tenancy rates and good capital growth. Look at 12-months of sales data for suburbs and define what is a low and high buying price.
Choose property in the right location – Search for areas that have been earmarked for growth, are located in commuter belts and have good infrastructure. Find out what represents value for money when buying.
Do your sums – A good property investor is one that buys affordable property and has a strong cash flow. This ensures that if problems arise the investor can afford to maintain property payments. Therefore, know what it will cost to buy a property. Include stamp duty. Estimate how much you’ll collect in rent. Calculate land tax, emergency services levy and council rates, as well as landlord’s insurance. Work out your total costs for a year, less your rental return to determine your profit or loss for the year. Then determine if this is affordable.
Always have a buffer – Property experts suggest having enough residual income in an account to cover a property’s costs for at least a year. This includes mortgage repayments, council fees and insurance costs.
Are you looking to buy an investment property? If so, then contact eChoice TODAY.