3 ways to get the most out of your first investment property
Do you want to make more money? We’re fairly certain there would be a general consensus for that answer.
There are in fact relatively straightforward ways to help you increase your long term wealth and secure your financial stability. Investing in real estate in Australia is one of the vehicles you can use to get there.
It’s not a fire-breathing V8, nor is it a wee mini. Think of property investment more like a diesel tractor (with low emissions of course) that toils hard for you every year to bring you capital gains and rental yield. While it may not bring you sudden riches, the returns can build up over time.
The recent results from CoreLogic RP Data seem to suggest that the tractor may have had been temporarily turbo-charged, as over the year to August 2015 there were 437 suburbs added to the exclusive club of holding a median price over $1million.
Real estate in Sydney dominated the top 20 list of most expensive homes, accounting for 17 of the coveted spots.
However, all vehicles needs a service every now and then and it’s no different for our tractor. In light of this, here are three ways to get the most out of your investment property.
Location, location, location
There’s no point plowing a field with your tractor if the soil isn’t any good for growing anything.
Choosing where to buy your property is just like a farmer determining which paddock to plant their seasonal crop. Some areas will produce much greater yields than others, so it pays to make a decision backed by information and insights.
To find out what areas are performing well with the most profitable homes for sale, familiarise yourself with market reports and related blogs. Look into the median prices of different areas, how they’ve grown over the past decade and how they compare with surrounding suburbs.
If you’ve managed to narrow it down to one suburb and you can afford it (a home loan calculator can help you here), study the local council reports and plans to see if there are any changes scheduled for the future that could affect property in the area.
These developments can range from positive to negative, such as a new grocery store down the road or a proposed motorway just over the fence.
Adding some modifications
After you’ve made an informed decision and bought a property for sale in a prosperous area, it can be tempting to just sit on your laurels and watch the cash amass from rent payments and capital gains.
However, this won’t always work as you may struggle to find traction in a slower market. Fortunately, there are ways to build up your equity and profits.
A report from IBIS World revealed that Australian households spend almost $60billion each year on renovations. For good reason too, as they can often add disproportionate value to your investment property. According to the Australian Property Institute, some of the most effective renovations include:
- A fresh coat of paint (both inside and out)
- Adding an extra bedroom or bathroom
- An overhaul of the kitchen
- Updating the front facade
- Creating an outdoor entertaining area
- Adding a granny flat
Obviously some of these renovations are cheaper than others, but what they all have in common is that they can add a lot more value than what they cost.
Using a property manager
Having a constant mechanic on hand to tend to any issues your tractor might have means you will be able to enjoy the benefits of an investment property, without worrying about the speed bumps.
A property manager can advertise for tenants, select the most suitable for your home, collect bond and rent payments, carry out inspections and deal with any repairs or required maintenance.
If the manager works within a real estate agency then could also be equipped to offer you unique insights about the property market in your area.
As they say, time is money, and using a property manager to mind your rental properties can save tractor loads of it.