In our last blog we talked about one of the goals you may have within your Property Strategy ‘Goal 2: Buying or building to sell in the next two to five years’ and we highlighted some important things to consider when buying a property that you want to resell in a short period of time.
But what if you don’t want to sell and you want to use this property as a stepping stone in building an investment portfolio? Again this strategy gives you some options in regards to the type of build, which may include a traditional family home, a townhouse, or a block of one or more units, but with an investment property it’s all about the Return on Investment (ROI).
One of the first things to consider when looking at purchasing a property to rent out in the future is any ongoing costs such as property management fees, strata payments and council rates. Will these costs take too much away from your ROI? Can you foresee any considerable increases?
Factor in any upkeep and repairs that may be required on the property. Keep in mind that you’ll be living in the property first so you can to do any repairs yourself before you rent the property out.
Building or buying a house and land package may be a good option here in order to minimise maintenance costs and maximise taxation minimisation strategies. Discuss these with your accountant.
Location is always key for an investment property, so do your research and go where the vacancy rates are consistently low, considering the proximity of the property to essential services like public transport and schools.
Often a large backyard is not a consideration for renters. If your home will become an investment property in the future then a large backyard only adds to maintenance costs and is unlikely to add to the rental return. But consider an outdoor living or alfresco area are they are very popular these days.
It’s also important to consider whether the property will be negatively or positively geared. Do you have the extra funds required to negatively gear your investment?
Living in a property, and then moving into another and renting your first buy can be a great way to start your investment portfolio and will be a stepping stone on the path to a bigger property strategy. So make sure you’ve considered how all of your decisions will impact on your ability to rent your home in a few years. Some sacrifices may need to be made in the short term in order to maximise your return and fulfil your property strategy.