Top 10 Questions to Ask Before Purchasing Your Next Investment Property for Rental
With the rising prices of property in Perth as well as a very tight rental market, there is increased interest in property investment as a wealth strategy. But before you buy your next investment property, what are some key questions you should ask so that you can ensure that you are making the right choice?
With 70 years of experience in the real estate market in Perth, here are some of our suggestions (read full article on our blog):
1. What is my long-term property strategy?
2. Is the property an investment-grade property?
3. Location, location, location
4. What are the suburb amenities offered?
Proximity to transportation, local library, shopping centre, restaurants and good schools – are important considerations for renters. Is there any infrastructure development which would increase the appeal of the suburb? In addition, what are the rates that you need to pay as well as any strata fees incurred for the use of these properties?
5. What is the potential of the property itself?
Is there something unique about the property that has a particular appeal? Is there a way to add value to the property without waiting for capital appreciation? Always make sure that you perform due diligence on the property to consider any risk.
In addition, understanding property feature that is most desirable for renter profile of each suburb is important. For example, for family renters, a typical 4-bedroom, 2-bathroom homes are often popular.
6. What is the property worth and what is the rental potential?
8. What is the state of your accounts? Has the finance been pre-approved?
9. Do I have sufficient cashflow to ensure that I will not have liquidity issues?
Ensure that you plan for fund contingencies in the event that there’s an emergency. This is one of the bigggest risk that an investor undertakes.
10. Is this an emotional purchase or a business decision?
Many investors make the mistake of buying close to where they live or where they want to retire. Instead, they should be considering a property with good potential growth.
While purchasing a home to live in, an emotional purchase is common however in this case, emotions cannot cloud your judgement. You will need to negotiate the best possible price and consider your cashflow strategy.
In addition to all those questions above, have you considered the robustness of your plan or what happens if your financial circumstance changes? Many property investors fail because they did not have the financial strategy in place to ensure that there is holding power if something goes wrong. Because even with all the checks and due diligence performed, there could be inconspicuous which is unexpected.
If you would like to speak to our property manager before making your next purchase, we welcome a conversation to help you identify some factors which the rental market appreciates or some dangers you could avoid.
