Choosing the right property for you
Purchasing a new home is an exciting and often life-changing event. As a soon-to-be homeowner there are a few things you need to consider before making any important decisions.
Firstly, you will need to decide which suburb/area you would like to live in. Consider how important locality to schools, transport and general amenities are. Then, consider the details surrounding the property itself. How many rooms would you like to have in your home? Do you require a large yard for children to play in or to park vehicles in to keep them off the street?
With investment properties it comes down to purchasing in an area with the best capital growth and a steady rental return as the earnings will make holding the property more affordable.
Different types of residential properties can outperform each other over time. For example, vacant land purchased in an area of limited supply may appreciate quickly, however, it doesn’t offer any income in the interim. Investing in an apartment may offer a fantastic rental yield and mean less maintenance costs in comparison to a free-standing home. It is important to note that properties in younger areas that are still being established usually offer great rental returns, however, they may take longer for the investor to benefit from great capital growth opportunities.
Interest rates and mortgages
When purchasing a first home or investment property it is good to have already organised exactly how much you will be willing and able to borrow. Speaking with a finance broker is a great idea as they will be able to shed a lot of light on where you stand with your finances. They’ll often be able to best guide you in terms of what type of loan will suit your circumstances, and possibly arrange your finance pre-approval.
There are many different options when it comes to choosing the right home loan. Generally, with an investment property, “holding costs” are tax deductible. It is wise to keep your investment loans and home loans separate so that it will be easier for your accountant to claim your tax benefits.
It is also important when taking out a mortgage to consider a fixed or variable interest loan. Choosing a fixed interest rate can really pay off if the timing is right, however, variable interest rates tend to be cheaper overall.
Age and condition of the property
When purchasing a property, it is wise to employ a licensed builder and/or timber pest inspector to complete written reports on the property. This ensures peace of mind that at settlement the property will be free from termites and will comply with the Australian Building Standards.
When it comes to understanding the market you are buying in, it is important to closely monitor the suburb. The more property you are able to view in your subject area the greater insight you will have on the pricing of listings and in negotiating on your purchase.
It may also be helpful to speak with a member of planning at the local council to find out what major developments or changes may be occurring in future. For example, an improvement to the local parkland or school located nearby or a widening of a road/bypass. These factors may influence the overall market worth of the property as time goes by.
Consult professionals and work only with information you can trust. You can log onto the Real Estate Institute of Western Australia (REIWA) website where you will find information relating to market indicators, suburb profiles, price and rental data, and more. Utilising all these factors and resources together will help provide a greater understanding of the current market in your subject area.
Take a long-term view
Unlike other investments, property should be considered over a longer-term. Property is deemed to be a stable investment, however, it’s important not to rely on prices rising rapidly in a short period of time. The longer you can afford to hold on and commit to the property, the better.