Rent-investing in property is a growing trend in Australia. Many young couples are choosing to rent in convenient locations while cashing in on the investment wave, riding high on low mortgage rates and first home buyers grant for new constructions.
Kim and Joe were looking forward to buying a dwelling in uptown Sydney. However, with property rates for single-bedroom apartments starting at $550,000, they decided to make a smart move. Today, they rent a 2 bedroom house for $650 a week and own an investment property in one of the suburbs whose mortgage is taken care of by the rent it earns.
A smart move calls for smart planning. Here are some tips to get a great deal on your investment property.
1. Where to buy?
This is the first and the most crucial decision you would make as you enter the real-estate market. Don’t be deterred by the high rates, check out the latest real estate figures to zero-in on an area that fits your budget. You can find apartments in the Winston Hills, Wollondilly and Bradbury in Sydney between $278,000 and $299,500.
2. Rental value
Once you identify your budget and shortlist the properties you’d like to explore, the next step is to determine the rental yield. For example, for a property worth $75,000 to be positively geared, it must fetch a minimum weekly rent of $150. Vacancy rates (which are currently less than 2% in Sydney) in the area can give you a further idea of how soon your investment could be earning rent for you.
3. The art of negotiation
Negotiating knowledgeably can land you a great deal. Whether it is negotiating with your broker for better interest rates or more flexible terms or with the seller’s agent for a more favourable price, brush up your negotiation skills to save money during the purchase and the course of your ownership.
4. Know you limit
Once you choose a property that fits your needs, you must ascertain its true value. Check out similar houses in the area, recent sales, average rental yield and the growth capacity of the area. Keep the final figure as your upper limit.
5. Know your seller
if you could gather some information about why the property is on sale, it may be easier to negotiate a price. For example, if you know the seller is distressed or in dire need of cash, you can assume he is more likely to agree to your offer.
6. Start slow and low
Always a smart move to reserve your final price and start by quoting low. Even better if you let the other party quote first. Ensure that you offer a low but respectable figure so as not to cheese off the seller at the onset.
7. Speak less, listen more
Rather than showing off your knowledge, ask informed questions to find out more about the property. Listen to the demands of the other party and keep the conversation positive. Try to make a counter-request for every demand made by the other party. Sometimes, negotiations are not just about the price but can cover other aspects of purchase as well.
8. Market trends
It always helps to keep a track of market trends. As quoted by Corelogic RP Data’s report, rental rates are going down in all the capital cities of Australia. Over the past 12 months, rental rates across the combined capital cities have only increased by 0.5%. Quote the report to negotiate the price in your favour.
9. Less competition
In response to regulators concerns, lenders are tightening their lending for investing in property which means first-time home buyers may face less competition from investors at auctions. Further, with record high number of auctions listed this autumn, clearance rates are dropping below 70% offering more choice to buyers and stiff competition to sellers. Another trend you could use to your advantage.
10. Lastly, control your emotions
Don’t get attached to a property and end up shelling more than you decided. Move on, there is a huge market waiting to be explored.
So if you are ready to invest in property check your borrowing capacity with our free to use