Property investing checklist

Investment in real property, such as residential or commercial real estate, is likely to be a lengthy process and one that usually involves a plan for the long term. To ensure you have considered what is required before making the big purchase, we’ve outlined a few steps you will need to take into consideration.

Make the commitment

A property investment must be a long term commitment in order for it to be worthwhile, so the very first step is to do the numbers in order to evaluate your budget, potential constraints and future financial and personal obligations including the potential impact on family members.

Consider your future as far ahead as you can. Property investors will need to assess their ability to maintain or improve personal income. Investors will need ongoing financial capability to continue to service the financial impact of the investment for a minimum of five to ten years, as that’s what generally brings premium results when selling.

Property investors need to also make the commitment to manage their investment – even if you outsource the day-to-day tasks involved including locating suitable tenants, collecting rents, paying relevant costs in rates and taxes as well as ensuring that the property’s repairs and maintenance are kept up to date.

Obtain professional advice

You now need to obtain professional advice. An investment in real estate is likely to be significant in relation to your current financial position. If you have already discussed the investment with a licensed financial adviser and residential real estate is considered the most appropriate in your current circumstances, you will have considered aspects including rental return, maximum capital growth and tax effectiveness.

Next, you will need to locate a suitable property. There are buyers agents available who can assist you in this process – potentially saving you money by disregarding inappropriate properties and concentrating on those that are more likely to deliver the highest return and capital increase to you over the investment timeframe.

Following that, unless you have cash or other investments that can be converted to cash to make your property investment, the next step is to contact your Mortgage Broker to help you to secure finance to enable the purchase to occur.

This will give you the opportunity to ask your Mortgage Broker as many questions needed to alleviate any uncertainty you may have about securing finance for your investment property purchase.

Mortgage Brokers who assist consumers to secure finance for residential property are heavily regulated and must be licensed or appointed by a licensee. They must also hold membership of the external dispute resolution scheme and must hold appropriate qualifications including maintaining continuing professional development. Mortgage Brokers will also hold membership of an industry body, like the Mortgage & Finance Association of Australia which triggers a requirement of an additional layer of obligations through compliance with its Code of Practice.

Using the services of an accountant, financial planner, conveyancer and property manager on your team will also assist you in coming to your property investment purchasing decision.

Assistance from relatives & friends

Talking to friends, family and acquaintances who have already made such an investment, or are currently considering one, can help your awareness of stumbling blocks and potential issues that you might otherwise miss. While any issues you face may seem new, it can help to bounce these off a trusted friend or relative who has been in the same situation before.

Collate your information

In order to apply for finance, you will need proof of your current income, employment and your assets as well as all liabilities including debts, loans, rental payment, outstanding credit card obligations and any other due payments, for example, buy now pay later commitments. Collate these and also any paperwork that helps support your personal financial position.

For example, if you have been a long-term tenant, get a 12 month tenancy statement that proves your capacity to make regular repayments. Before applying for a loan, minimise your current debt load, and if possible, reduce the limit on, or cancel any credit cards you have, as this is perceived by lenders as potential for you to accrue a debt.

It is strongly recommended that you have a fully assessed pre-approval before you start your property search. This will allow you to know what your financial limits are so that you can make an offer when you’ve found a property you like.

Other things to consider

An investment property purchase should not be an emotional decision. It is a business and investment decision. If the property isn’t as clean as you would like, don’t assume that it hasn’t been maintained unless there are other clues to demonstrate that. Cleaning and even simple maintenance tasks are things you can do yourself or even have them done for you.

Consider choosing a property based on whether you feel like you could live in it. While it’s still a business decision, you also have to adopt the mindset that you could be selling to an owner occupier down the track, which could be an emotional purchase for the potential buyer in the future. If you plan to rent the property, your decision should be based on what would appeal to the type of individual who wants to reside in that specific area.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.