What to look for when purchasing an investment property

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Entering the property market is a huge step. It’s a major purchase that comes with a lot of considerations and risks. Whether you’re purchasing a home to live in or you’re making an investment, it will require a large amount of cash, so it’s crucial to understand what to look for to maximize profits and avoid losses. When purchasing an investment property, the processes and what to look for will differ from buying a home to live in. Here’s what you should look for when purchasing an investment property.

The Local Area

The city, town and suburb a property is in can have a huge influence on the price of the property and any future returns. Understanding this alone can help you make the right choice when buying an investment property.

Buying a house should never be an impulse purchase. Instead you should conduct thorough research on the house itself, and the surrounding area. When buying a house to live in, you will understandably visit the area, but for an investment property, this can sometimes be more difficult. Areas that are suitable for investment might be on the other side of the country and you may simply not have time to conduct extensive research. Luckily, sites like Roofstock review properties and provide extensive market analysis for investors. The site breaks down neighborhood statistics and details the risks and rewards that come with certain properties. With this information, included with 3D virtual tours, means investors never have to visit a property to make a purchase.

Regardless of how you qualify your investment property options, it’s important that you purchase in an area that is experiencing or is due to experience high growth. This growth will not only ensure that you constantly have tenants, but it will also mean that your property grows in value.

The Property

The property might look great but it’s important to understand why the property is on the market. Is it a new, or old property? Who was the house built by? Make sure you check the house and take note of anything that will need to be repaired or things you will want to update. This is important as you must factor in these costs to your investment.

Sometimes the sellers will be selling for a reason outside of the property, such as a new job opportunity, however, sometimes a property is on the market for a reason which might make you reconsider making the purchase. As a smart investor, it’s your job to dig up any issues that could negatively impact your investment.

 It can be valuable to get a building and strata report as well as a pest inspection. These reports will bring to light any issues that may impact your investment further down the track.

Your Finances

Whether you’re buying a house to live in, or you’re making an investment, its critical that your finances are in place. As we have said, a home is a huge investment and if your finances aren’t prepared, you will likely have trouble making the repayments on your loan. Understanding how much deposit you need, your borrowing capacity and any extra costs will help you avoid any problems down the track. 

Once your finances are in check, it’s crucial to calculate the expenses and profits before you make the purchase. The more research you do, the safer your investment will be. Calculate how much money you have, and how much you can borrow, and compare that with how much the property will cost a long with how much any renovations or repairs will cost. Next, calculate how much you can expect to resell the house for, or how much rental yield you will receive. Calculating these numbers will prepare you for making smart investment decisions.

Investing in property can be a great way to earn a passive income through rent and build up your wealth assets. However, without the proper planning and knowing what to look for, an investment property can be a serious financial mistake.

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