A Guide To Buying Your First Investment Property
SM Property

May 15, 2023

Once you’ve set your investment goals and have built up your property A team, it’s time for the fun part. Securing your finance, buying an investment property and building your wealth! Here’s what you need to do when buying an investment property.

Assess your financial position

You’ll normally need a 20% deposit to buy a new build property, which is likely to be at least $120,000. This can be from cash or equity in your home. You’ll also need to be able to afford mortgage repayments with your income and prove to lenders that you’re able to (this is called serviceability).

What if you don’t have a deposit in cash or other investments? You can also refinance the mortgages on any property you already own, and use your equity as your deposit. Speak to a mortgage broker to find out if you can use equity as your deposit and to get mortgage pre-approval before buying.

Understand Your Loan

Your loan needs to be tailored to your circumstances, goals and the property you buy. In fact, a well tailored and structured loan could save you thousands every year and help you grow your investment portfolio faster. That’s why a good mortgage broker is worth their weight in gold, so if you find one hold onto them!

Figure out your investment strategy

When buying new build investment properties you’ll usually be looking for three factors during your property hunt – high yields, potential for capital growth and the ability to add value. Only consider properties that have at least two of these factors and make an offer straight away (or tell us so we can) if you find one that has all three.

High yield

Your property’s net yield is the rental income generated less holding costs over the property’s value. High yielding properties are great because they can often cover their own expenses and may even generate positive cash flows for you. Cheaper, smaller properties in more affordable areas tend to have higher yields.

High Capital Growth

When your property increases in value after you purchase, that’s capital growth. It’s difficult to know whether this will happen prior to buying a property, but you’ll give yourself a better chance by buying property below market value in areas that are gentrifying, have new infrastructure projects in the pipeline and are becoming more popular with buyers. Properties with high potential for capital growth can often have low yields.

Potential to add value

Taking a property and quickly improving its design, livability or utility is one of the best ways to ensure quick capital gains. It’s not as easy with new build property as usually developers have already maximised the value of the site. One of the best ways to add value is by subdividing and building a new property on a large section. But this strategy, although potentially lucrative, comes with more risk and isn’t for everyone.

We know that investing in property can seem overwhelming, but it doesn’t need to be. Most of the SM Property team are active property investors themselves and can walk you through the whole process. Contact the team today to get started, or head to our Instagram for more investing tips!

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