Despite all the advice about not buying a residential property for income purposes when the market is uncertain, many still do, and for good reason. Rental properties are always in demand in the hottest real estate markets, with vacancy rates still hovering in the mid-1% range. As such, buying property to rent out makes sense, as long as you have a large enough down payment to ensure that rent covers expenses.
For the best entry price point consider single-unit rentals, such as condos and remember the golden rule- “location, location, location” is the name of the game. Do your homework and learn what areas of town are located near universities or hospital hubs. Quite often, these neighborhoods offer year-round tenant stock and slow but steady price appreciation.
Conveyancers vs. Solicitors:
A more complex transaction will probably be better suited to a solicitor. A very simple transaction can be handled by a conveyancer. They will be cheaper than a solicitor and likely able to do the same job. The main difference between conveyancers and solicitors is that conveyancers may be restricted in what they can do if things get complicated.
It amazes me how many new investors purchase a property without any building or pest inspections only to find out that it’s termite-ridden or that it has issues with the foundations. Paying for a building or pest inspection buys you the insurance of knowing that the property doesn’t have any major issues that are going to cost you an arm and a leg down the road.
Brain vs Heart:
Most of us will get emotional when we purchase our first investment property. But getting emotional means we could pay more for the property than we should have. We can easily make poor financial decisions if we think emotionally and don’t stay objective about the potential investment. Try to look at buying your first investment property as a financial deal – as if you’re buying stocks on the stock market.
Remember that investing in property is a vehicle for financial success. It’s a means to an end. It’s not the end itself. You want to achieve something financially. So know what you want to achieve and try and buy property that will help you to achieve that.
Don’t just assume that because your mortgage is $400 per week and the property rents for $450 per week that your property is going to be positively cash flowed. There are many expenses associated with an investment property that you need to consider before you buy in including property taxes, building management fees, and maintenance costs. The last thing you want is to purchase a property thinking it’s going to net you a positive cash flow only to find that it’s actually costing you hundreds of dollars per week that you cannot afford.
As in life, almost everything in real estate is negotiable. Most people assume they can only negotiate on price alone. You can negotiate things like settlement dates, have early access to the property, put down a smaller deposit. Imagine if you’re holding your deposit of $100,000 for an extra month and you’re getting 6% on that. That means you’re going to earn 0.5% on that $100,000 – $500 for delaying the closing by one month….a good start on the road to positive cash flow!