Some people pay too much when they buy an investment property while others are not making the best of their buying opportunity. There are mistakes that are easy to make particularly when a real estate sales person is the sole source of an investors property knowledge.
In all of Australia's capital cities professionals in the property industry are currently very active sourcing development sites, designing new apartments and building them to satisfy the demand for inner city living or investment stock. When they buy investment real estate, some property "newbies" choose to drop into the local franchise of the major real estate agencies and sign up to buy the first retail price property that was recommended to them by the real estate sales person who greeted them at the door. That is the lazy way to buy an investment in real estate but many people do just that. Buyers get a second opinion or conduct research on the basics like, ownership structures, location, design and neighbourhood research.
Astute property buyers treat their financial welfare as a very serious issue and conduct a wide ranging search for an investment property to buy, and before buying, they always seek the opinion of a range of property professionals.
The property industry is complex. It has many facets ranging from people who help prior to a purchase, people who create the property that people will invest in and there are still more people who help property owners to manage or maintain property investments to maximise its return.
It is important to remember that poor choices in relation to a real estate decision can have long lasting adverse effects on people's financial situation.
Here are some insider tips to making better property buying decisions
1. You should establish a long term relationship with a property insider.
Be one of the people that property location specialists call when a new property comes on to the market.
It is a fact that the best property does not make it into real estate agent's window displays. They are allocated to people in a tight property inner circle who get first choice off the plan often at prices way below the retail price that insiders sell to make a profit when a building is finished.
2. Pick a project that is created by a quality design team.
Who is the architect? Can you inspect some of the work he or she has done in the past? What awards have they achieved? What is the feedback from investors and residents?
Architecture is not unlike the motor industry. There are Proton Brumby's and their are Audi's. Any make will get you moving along the road but which one has a higher resale value retention rate, grater safety and longevity?
Investment property is not all the same. Consider who the architect is. Peruse the plans and specifications in detail because they tell you a lot about the functionality and quality of the project. Little things matter: Hot water service for instance. 30 litre instantaneous electric that will cost a lot to run or 120 litre solar boosted?
Look at the design and fit out, if possible with computer generated graphics and walk throughs. Don't let just any designer experiment with an investment property that you will end up owning. Look at the amount of floor space and how it is allocated for quiet spots, living, sleeping or study.
Just because it is an investment do not overlook how it will function for tenants. Again, the basics are important... like, does the front door open right into the main living room? Views, breezes, noise !
The best tenants are hard to find and if you have the best property to rent, they are more likely to come your way and STAY.
3. Location. You might pay more for the better locations but the return can be higher.
Every city or town has its best areas.
Some parts of a suburb are better than others. Conduct enquiries online and with property professionals or even take a long walk through a neighbourhood that you are considering becoming a part of.
If you would not live there, then maybe your investment will be empty for a while as tenants will not be keen either.
Subtle things can make a huge difference. Industrial noise, road noise, poor socio-economic demographics, population density, crime, poor building design and services like shopping or schools are factors that determine whether a suburb or even down to an individual street level investment, will pay off one day. Clearly, over time property become more valuable, however, some properties will become more valuable than others.
To be a property winner takes effort. A property acquisition expert can instruct you on historical price trends and extrapolating from that, gauge future value gains and rental return growth of an investment in a particular location.
4. The Builder. Not all builders are created equal.
Some builders are exceptional and half the builders in Australia are below average.
A property acquisition specialist can tell you a lot about the builder of a property. Are they in continuous work because they are in demand or were they given the job because they were a back up?
Some builders employ the best contractors and use the best materials. Some builders start a job like an apartment building and then go away for a long time to start or finish others leaving some property investors or buyers waiting for their investment to be finished.
5. Local government issues
Neighbourhoods vary. Some locations are pleasant and others not so.
If you are being offered a property in an overcrowded, dirty crime ridden part of a city there might be good reasons to buy. The local council or the State government may have major redevelopment plans that will profoundly change a neighbourhood and make it more attractive. Do the research or work with a property professional who already has the answers.
Some local government changes are positive and others not so. Unless you know what is being planned, you could be in for some surprises after you become an owner.
6. Inside knowledge
Find a property education service. A business that offers property education and acts as a consultant, can be more beneficial in the buying process that a real estate sales person.
Does your agent share his or her local knowledge?
Does your real estate agents tell you all that you need to know about a suburb, a builder, a developer, rental demand or recent sales?. If not, find out before signing up to buy at a franchise local real estate agent.
7. Introductions to property industry support people
Deal with a property acquisition business or real estate agent that will introduce you to people who advise on property ownership financial planning.
Most real estate agents are not financial planners but they can introduce you to financial experts with a top reputation who have earned there trust by the market.
Financial planning is complex and every buyer has different needs within their individual circumstances.
For some buyers, joint ownership will be best and a planner can suggest owning a property in different proportions so that high earners own most ( and can make the most of tax deductions ).
For another buyer, a corporate ownership structure will be appropriate.
Take the time to ask for advice and opinions from experts. It can save expensive mistakes.
8. Property management
A property education service will often have a real estate agent, body corporate management service or conveyancer in their tight circle. Buyers can share in knowledge gained from experience about how best to interact with tenants and maintenance services once they own and enjoy the rental returns that property ownership creates.
9. The benefits of property ownership.
Owning real estate is something that investors can be proud of and ownership can often be rewarding in terms of financial Independence.
Successful property investment does not happen by luck. People have to make it happen for themselves. The more information that an investor can acquire and the professional support that a buyer seeks will always have positive and fundamental effect on success.
For anyone looking to do well in the property market, avoiding mistakes is a good idea. Making the possible best decisions about location, price and design is vital. To avoid mistakes and to make great choices, investors will have to seek out information before they act.
Take the time to speak with a property professional who knows the local key players and can instruct you in the fine points of sourcing a negative gearing or self managed superannuation property investment or a property to own for residential purposes.
Find a team of real estate agents with a genuine interest in educating their clients. Choose a select group of professionals who share information and contacts with clients before, during and after they choose a real estate product. Look for a property consultant who continues to offer support for the long term.
About the author
Jeff Grochowski is the Managing director of Accrue Real Estate.
Accrue Real Estate is a Melbourne based property acquisition agency and real estate agent that has assisted thousands of real estate investors.
Find out more www.AccrueRealEstate.com.au
This feature article published in collaboration with MultiViw