Minimising your property investment risk
Taking the time to research the area you are planning to invest in is essential. There are many online portals such as Real Estate.com.au, Domain etc. which can provide detailed suburb guides that supply information on home sales, sale prices, clearance rates, occupancy rates and population demographics. Local Real Estate agents are also a great resource.
When buying a property you intend to lease, you need to evaluate the potential rental yield – that is, the annual gross rental income as a percentage of the overall property value. With this in mind, investors often look to apartments for sale as they require less upkeep and attract lower utility and land tax fees than freestanding houses. On the other hand, apartments attract strata or body corporate fees, and owners may be required to attend management meetings. Investing in a house and its surrounding land may provide greater capital growth as land prices have been on the rise in Australia’s capital cities. A house may also attract families, who are less inclined to move and are seeking longer-term leases.
Renovate and sell
Purchasing a property so you can ‘flip’ it after undertaking a renovation can pay dividends, but you need to be wary of overcapitalising. Obtaining the real estate at a great price, having the time and knowledge to renovate and sticking to a budget are all key factors.
Off the plan
Seeking good legal advice when reviewing contracts will avoid problems if the development falls through or there are building defects. The upside is that you can secure a property for sale at today’s market price with just a deposit. When it comes time to pay the remaining money owed at settlement (usually when the construction is completed), the market value could possibly have increased.
Guaranteed rental schemes
Property investments offering guaranteed rental returns and all-inclusive property management services can provide greater security for investors. You should evaluate these investment properties as you would any other real estate investment, as this will determine whether you are likely to make a capital gain over the long term.
Landlord insurance and mortgage protection insurance are two products that will help reduce your property investment risk over the long term. Landlord insurance covers your investment property’s building and permanent internal structures, and provides protection against a tenant defaulting on their rental payments or damaging the property.
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