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Finding your perfect property

Finding the right investment property

Choosing the location and property wisely are key to successful investing. Here are some time-tested fundamentals of finding the right investment property that could help you achieve your goals.

Make sure the property’s cost and likely rental returns align with your strategy

Having a solid rental strategy that matches your goals, costs and projected income is a must to ensure you come out ahead in the investing game.

“Buy and hold” is a relatively straightforward investment strategy that is popular among many investors. Designed to generate long-term capital growth, this method often depends on your investment appreciating over time. 

As the value of your property increases, you may be able to use the equity generated to borrow more money and increase your portfolio in the market. 

Choose your strategy, know your cashflow

No matter which investment strategy you choose, it’s important to understand how your outgoings and income affect your overall bottom line. 

  • If you’ve chosen a “Buy and hold” strategy, make sure you get professional advice on the right property to invest in. Poor property selection could mean you pay too much for something that has little chance of making a good return in the long-run. 
  • For those who choose to buy a fixer-upper and renovate, the initial outlays may be significantly less than those who purchase a newly built or renovated property. However, once the extra labour and material costs have been calculated, your cashflow could be looking significantly less rosy. 
  • Trusting a developer to handle your rental investment can mean less management on your part. Investing off-the-plan can also provide stamp duty savings. But keep in mind that the resale value of your property will eventually be determined by the local market.

Understanding rental yields 

A major part of cashflow with many investment strategies is rental yield. Rental yield is a way of measuring how much income your property is generating for you on a yearly basis, as a percentage of its total value.

Need help with your rental investment strategy?

Diving into a rental investment strategy without clear goals can be risky. Investment strategies are always best discussed with an experienced financial planner. Suncorp Bank has a team of expert financial planners who can help. Learn more.

Consider the underlying value of the land

A good rule of thumb for property investment is that land usually appreciates, but buildings depreciate. The more land you have, the more the value of your rental property may increase.

While your regular repayments may provide you with an idea of what your property was worth when you purchased it, figuring out the value of the land you’re sitting on could be a different story.

Understanding investing costs and deductions

Balancing your expected property costs and potential tax adjustments can help you better manage your property outcomes in the long-term. 

Buying costs 

The sale price for your investment property is just one piece of your total costs. You’ll also have to cover the regular expenses that come with buying property in Australia including stamp duty, legal and conveyancing costs, transfer and search fees, and building and pest inspection reports. 

Ongoing property costs

Along with the initial cost of your investment property, you’ll also need to consider ongoing costs that come along with it. Common ongoing costs include: repairs and maintenance, property management fees and home insurance. 

You may also want to think about the costs you’ll incur if you chose to sell the property, such as agent fees and capital gains tax.

Negative and positive gearing 

Most people who invest in property borrow funds to purchase their investments. This is called ‘gearing’. 

Negative gearing is where you borrow money to invest and the income from the investment (e.g. rent) is less than what the investment costs you (e.g. the interest you pay and other related expenses). Essentially, this means that you’re making a loss on your investment and off-setting this against your taxable income.

In comparison to negative gearing, positive gearing occurs when your investment property earns you income, normally in the form of rent. 

Look for areas with a stable or growing population

Choosing to invest in a popular area could ensure that you’re never short of a tenant. While there’s no foolproof method to picking an area on the rise, there are a few tell-tale signs to watch for.

  • Keep an eye on recent sales – Popular real estate websites and the Property Explorer feature of the Suncorp App can provide detailed reports on suburbs based on recent sales data.
  • Compare supply and demand – Oversupply can come in many forms. Be aware of the number of building projects in the area. If many new units are coming on the market, lower rental yields could follow.
  • Gentrification is on the rise – Trends come and go, but when an area moves from dated to ‘hip’, the price of property often ticks upwards.
  • Watch what’s on the horizon – Big infrastructure projects can make areas more or less appealing. Scope out what’s planned to stay ahead of both opportunities and risks.

Understand what’s important to local renters

When looking for the right investment property to put your money behind, seek out features that are attractive to as many people as possible. 

  • Buy in areas popular with renters and owner occupiers – Look for properties with broad-based appeal, with good access to transport, shops and local amenities. 
  • Consider the property layout and aesthetics – Think about the profile of typical renters in the area (e.g. young singles, families) and whether the property will be a place they’ll be happy to call home. 
  • Look for “X-factor” features – If your investment includes something extra like a communal rooftop or a lock-up garage, it’s sure to appeal to a wide variety of renters. 

Know the facts about buying in Australia

Not an Australian resident but keen to purchase Australian residential property? Knowing the ins and outs of how to invest as a non-resident can help you get ahead.  

To learn more about the rules and regulations for foreign investment in Australia, visit FIRB.gov.au.

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