Investment Property Guide for First-Time Investors

How to Invest in Property: Top Tips for First-Time Investors

Investing in property for the first time can seem overwhelming, but with the right advice, it becomes much clearer. Here are some helpful tips to guide you as you take your first step onto the property ladder.

1. Location is Key
Location is critical in property investment. Do thorough research to find the right area based on your target market. For example, if you’re targeting young professionals, look for apartments near restaurants and cafés. However, keep in mind that they may not stay long, which could mean periods of vacancy. If you’re targeting families, focus on spacious homes near good schools, hospitals, and amenities.

Also, consider the type of rental market: short-term (like Airbnb) or long-term. Each has different needs and potential profits. Check how many properties are available for rent in the area and what the average rental rate is to ensure demand exists. Also, assess the crime levels and talk to local residents for insights into the neighbourhood. An estate agent can help you find areas with good growth potential.

2. Get Your Finances in Order
Before investing, pay down any debts like credit cards or student loans to improve your credit score. This will make it easier to get approved for a bond. If you’re still paying off your own home loan, it’s helpful to have paid down a significant portion, but you don’t need to have cleared the entire loan.

3. Research Property Trends
Stay updated on market trends, as they influence where and when to invest. For instance, interest rates have been rising recently, but there may be rate cuts in late 2024. In certain high-end areas, property prices are falling due to lower demand, which could present opportunities for buyers.

Consider lifestyle trends, too. Young people today prefer micro-apartments with amenities like gyms and communal pools, which could influence where you invest. Estate agents are valuable resources for understanding both economic and lifestyle trends.

4. Inspect the Property
It’s crucial to ensure the property is in good condition. As a first-time investor, avoid buying fixer-uppers. Instead, focus on properties that don’t need major repairs, so you can avoid high maintenance costs. If buying a new development, while you can’t inspect the property, research the location and check the developer’s website for plans. Tools like Google Maps can help you understand nearby amenities.

5. Be Ready for Landlord Responsibilities
As a landlord, you’re responsible for maintaining the property and dealing with tenant issues. Make sure you’re ready for these duties before considering an agent to manage the property on your behalf. It’s also wise to set aside funds for repairs and maintenance.

6. Look for New Developments
New developments offer great investment potential because they’re designed with current trends and market needs in mind. Additionally, you won’t have to pay transfer costs, as VAT on the purchase price is covered by the developer.

7. Consider Taxes, Levies, and Other Costs
When investing in property, be aware of tax deductions, such as for expenses like levies, repairs, and insurance premiums. These costs can be deducted if you’re renting the property out. Understand the additional expenses based on the type of property you choose. For example, sectional titles come with levies for shared facilities, while freehold properties don’t have such costs.

8. Save for a Deposit
While 100% home loans may seem attractive, they’re not ideal for property investors. To maximize your rental income, aim to put down a significant deposit. This will reduce your monthly repayments and interest, making it easier to profit from your rental income.

9. Take It Slow
Many first-time investors rush into property thinking of huge profits. However, it’s best to start slow. Focus on finding a property that will generate rental income that exceeds your bond repayments. Once you’ve successfully invested in your first property, you can gradually expand your portfolio, one property at a time.
Securing Your Investment.

10. Get pre qualified
Before you start searching for properties, get prequalified for a bond to understand your budget. Services like BetterBond Home Loans can help by comparing home loan offers from multiple banks, increasing your chances of securing a favourable deal that maximizes your rental income.