Top Tips for Buying an Investment Property in Brisbane

‘Top tips for buying an Investment Property in Brisbane’ is provided by Your Property Hound – a boutique Buyers Agent Service operating in Brisbane and surrounding areas.

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Buy with your head – not with your heart!

With the Brisbane property market starting to heat up, buyers are becoming increasingly concerned about ‘missing out’ on investment properties.   This mentality places them at a significant risk of paying too much for a property.

Emotional buyers may also select an investment property based on its aesthetic appeal. The classic example are investors choosing traditional Queenslander style houses (often in very poor condition) in preference to a low maintenance/well-constructed brick and tiles homes.

Emotional buyers may also choose to buy in close proximity to where they live, and as a consequence miss out on investment opportunities further afield. Is your neighbourhood really the best place to invest?

Investment properties should instead be chosen based on their capital growth potential and cash flow characteristics. From a capital growth perspective consider the current and planned infrastructure in the area, as well as the supply and demand characteristics. Capital growth can be also be achieved through ‘value-add’ opportunities such as renovations, extensions or redevelopment. The estimated rental return, current vacancy rates, depreciation and other holding costs should be used to determine a property’s cash flow characteristics.

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Finance – Be prepared

Before getting too excited about your Brisbane investment property purchase, you need to know how much you can afford to borrow. After all, there is no point in looking at properties that are out of your price range!

A mortgage broker will assist you to find the best loan which has the potential to save you a significant amount of time and money. Get referrals to find the best broker for you! Ask them to calculate your maximum borrowing capacity, and find out whether or not you are in a position to bid at auction.  Having a pre-approval in place will give you the confidence to make an offer when you find the right property.

The ASIC Money Smart website provides useful online calculators for personal budgeting and mortgage purposes.

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Make money when you buy! How to time the market

Everyone knows that the best time to buy a property is during a “rising market”.

In practical terms this it not always easy to predict!

A rising market can sometimes be identified by certain statistical trends:

• The Average Days on Market tend to decline with properties tending to sell more quickly.
• The level of Vendor Discounting reduces as sellers tend to be less negoatiable on their sale price
• Low levels of Stock on the Market will tend to lead to greater competiion from buyers.
• Auction clearance rates tend to increase as the property market rises.

These statistics can be obtained for a variety of sources including Australian Property Investment Magazines. (API magazine)

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Cash Flow – Do your sums!

Brisbane property is generally considered a long-term investment. It is therefore important to calculate any holding costs to make sure your investment property will be affordable.

Ongoing costs to consider include: Interest rates, council rates, body corporate fees, management fees, and maintenance costs. These will vary greatly depending on the type and age of your property.

Explore a number of ‘worst case’ scenarios: What would happen if interest rates were to increase to 8%? Or if rental vacancy rates increase to 5%, or if your taxable income were to reduce due to changing work circumstances.

There are some great resources/software available to help you make these calculations.  (Somersoft.com.au)

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Minimise risk

Purchasing an investment property is a major financial commitment. Consider obtaining the professional help of a Brisbane buyer’s agent to assist with the purchase. Your Property Hound Buyers Agent provides a range of different services to assist you.

Having your investment property professionally managed will help to reduce the likelihood of extended vacancy rates, and assist in securing a good quality tenant. Interview a number of local property managers and seek referrals from providers you trust.

Building and contents, and landlord insurance is recommended for any investment property purchase.

What would happen to your investments if you were to became injured, unwell or if you were to lose your income? Buying an investment property in Brisbane may be the time to review your personal insurance needs. Consider income protection insurance and/or total and permanent disability insurance.

If you want any further information or help buying an investment property in Brisbane please feel free to contact us. Good luck with your search!