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9 Tips for getting started in property investment

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When it comes to building a retirement nest egg for the future, property is still regarded as one of the safest long-term investments. While some investors may want to buy a property and rent it out straight away, others may choose to live in the home while they renovate it. 

Investing in bricks and mortar can be a great way to create wealth, but there are some golden rules to consider before taking the plunge into property investment.

Know your budget

Before investing in property it’s vital to have a thorough understanding of your cash flow. Also, ask your broker for a genuine pre-approval of your investment loan so you know how much you’re able to borrow before you start hunting for properties.

Don’t underestimate ongoing costs

Make sure you budget enough for rates, insurance and general repairs. And when you have purchased your ideal investment property do what you can to prevent costly maintenance issues arising, such as replace ageing taps

Buy in a growth area

Try to choose an investment property in an area where there is strong demand for rental accommodation. Buying a property close to transport links and hubs, universities, schools and other amenities like shopping centres will make it more attractive to renters.

Be realistic about your investment goals

Are you looking for fast capital growth or wanting to hold the property long-term? It's much easier to renovate properties and turn them over for a quick profit during a booming market. In more stable or slower economic times, it may take many years to achieve the same outcome. 

Look for liveable not luxury

Remember a rental property only has to be clean and functional. A property that has many stylish features many have benefits as an investment property but it may also inflate the asking price.

Buy with your head not your heart

When house hunting it’s very easy to get caught up in emotions. While a home on a steep block may have a stunning view, it could be a nightmare to renovate due to retaining or excavation costs. Be sure you weigh up the pros and cons.

Think carefully before negative gearing

If you don’t have enough depreciable allowances and rent to cover the loan repayments, rates and other expenses (like body corporate fees) then your property will most likely be negatively geared. This can have tax advantages but if you've invested in a property that's not suitable to your financial circumstances or your debt isn't structured correctly, it can also lead to financial stress. Before you talk to a real estate agent about your intentions to purchase a property for investment, talk to your accountant. They know your financial situation a lot better. 

Still paying off your own home?

It isn’t necessary to have your own home fully paid off before buying an investment property, however it is important to be comfortable with your current debt levels. Ideally you’d have a large portion of your own home paid off and other debts, such as credit cards, under control.

Get a building inspection

New properties are covered by warranties but if you're considering an older, established home as an investment property, make a building and pest inspection part of the conditions of the contract. Take the time to understand the reports to avoid expensive repairs down the track. 

Talk to Etairos If you'd like assistance with your decisions about the property investment that's most appropriate for you. We understand the complexities of negative gearing as it applies to you and we are also licensed credit advisors so we can help with your lending as well. 

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