5 things first-time investors should know
As published in realestate.com.au Presented by Terri Scheer
Buying property for the first time can be difficult to navigate and investing for the first time is a whole other beast.
According to realestate.com.au's Property Seeker 2020 report, investors are now starting younger and most don't have the high incomes or vast property profiles we've come to associate with typical the words 'property investor'. Rather, it's younger and less experienced buyers that are using this strategy as a first step into the property market.
If you're just starting out in the real estate game, consider our tips to help you navigate the path to investing.
1. Buy properties of substance
Buyer's agent and Director of Advantage Property, Frank Valentic, has devised a checklist of 15 criteria that help them narrow down quality investment properties. These include location, floor plan, aspect, street appeal, parking, security, proximity to public transport, lifestyle amenities and so on.
"It's something we've worked on over 20 years based on what tenants want, and what buyers will want in the future when you sell it," Valentic says.
"For example, if it doesn't have parking, if it doesn't have outdoor space, if it's an apartment without its own laundry facilities – these are typically red flags for buyers and tenants."
Furthermore, don't get seduced by looks when it comes to investing in property.
"Avoid buying flashy new apartments that are high supply but low demand and will have limited capital growth prospects," Valentic adds. "It's better to buy the worst property in the best street, than the flashiest property in the worst street."
However, Valentic also warns against buying the cheapest property on the market.
"Avoid buying the cheapest property as it will be the cheapest low value property when you try and sell it," he adds.
2. Think big, start small
First-time investors should take baby steps into the market and avoid splashing out on their first investment.
"A successful property portfolio isn't built in a year," Valentic notes. "Think big but start small."
"When building your portfolio, start slowly. Buy something smaller to start with. Eventually, you'll want to buy more houses that have land because land appreciates more than apartments, but we might not get there with the first property.
"It's important to get people into the market but make sure they don't overcapitalise."
Look for something under $750,000, Melbourne-based Valentic says. Your cap may be slightly higher in Sydney, where prices are higher, or lower in other Australian cities, where median prices are lower.
3. Keep it simple – minimise risk
For that first property, Valentic advises keeping it simple in terms of what and where you buy. For instance, he recommends buying within your state for that first investment.
"Minimise your risks for that first property," Valentic shares. "I think buying interstate for your first property can be a higher risk strategy because you often don't know those markets as well. Buy what you know, where you know, where you can drive past, see it and touch it – making it easier for yourself and build confidence. You could buy out of state for next properties when you're ready to diversify."
4. Consider a buyer's agent
If you want to invest but are feeling out of your depth, you could always enlist the help of a buyer's agent to help you find an ideal property to meet your investing goals.
Buyer's agents not only provide a wealth of knowledge on the market, they can tailor your property search (and purchase) to your investment strategy, plus participate in auctions for you to help you bag your chosen place.
5. Don't forget insurance
The realestate.com.au Property Seeker 2020 report found 82% of landlords had insurance. There are, however, a small number who don't want it or haven't gotten around to getting it.
When you buy your first investment property, you'll watch your rising number of invoices and think 'hmm, what can I cut?' Top tip: it shouldn't be landlord insurance!
