The Property Observer compiled the eight frequently asked questions by home investors, giving us invaluable tips and tricks that we can apply to our property investments.
Do I need a Buyer’s Agent?
A common question being asked my most investors is whether they really need to have a buyer’s agent. Before answering with a straightforward yes or no, we must first understand the role of buyer’s agents and whether these suit our needs. A buyer’s agent is a licensed professional that can handle these tasks: searching for properties, assessing the property’s value as well as negotiate the purchase for you. If you are uncomfortable or inexperienced with any of these steps in property investment, a licensed buyer’s agent is a must for you.
What proportions of my income should be taken up by mortgage repayments?
Most people miss out in verifying how much of their income will be allocated for mortgage making this a common pitfall. Obviously, this depends on your budget but as a rule of thumb, one must spend less than 30% of what you are earning for your repayments.
How do I pick the best capital growth areas?
Property demand in a certain area should not be enough to convince you to invest. Invest a lot of time analyzing data; identify areas with significant economic growth such as infrastructure, transportation and employment data. There is no direct answer to this question, but hotspot information and other metrics can be used as a guide when investing.
When should I sell?
Based on the supply and demand model, you should sell before everyone else does. Do not wait for housing supply to meet demand as this can drastically decrease house prices.
What makes better investment properties, Units or Houses?
This would depend on what you’re aiming for: cash flow or capital growth. If your goal is to have a steady stream of income, then units are the way to go. If you are planning on taking advantage of high median prices, then selling a house is favorable, consider though additional cost for maintaining the property. Also be aware that unit and house prices vary in certain areas of demand.
How much should I spend on renovations?
A common recommendation is to spend 5 – 10% of your property’s current value. Renovations can increase your property value, but make sure that your initial expenses are covered by the increased value on the property. Factor in all costs related to renovations, such as materials and labor so that you have an idea if renovations are worth considering.
What sorts of properties make the best investments?
Charles Tarbey, the owner and managing director of Century21 Australasia shares his insight on the best investments. For him, investors should look into properties that are marketable to the top of first home buyers, and the bottom of second home buyers. In this way, you have two levels of people that may be interested in the property in case you decide to sell.
Should I sell at auction or private sell?
Both auctions and private sale have been experiencing favorable results for property investments. Go for how properties are often sold in an area. If your property has unique or special qualities that may attract a huge audience, go for auctions. This is a great way to sell especially for high demand areas. It ultimately depends on you – if you want the property sold at the fastest amount of time, auctions may be suitable for you. But if you want to take the time to consider offers, then go for a private sale.
Read more about this on the Property Observer website.