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FHBs Should Put In More Research

beachside homeFirst time investors haven’t felt too good in recent times. Their contribution to the Australian real estate has shrunk and the foreign investors have all but elbowed them out of the game. The crux question is- whether their sulk is justified or are they themselves responsible for it?

First time investors miss out on Due Diligence

I have once been a first time investor myself and even a Warren Buffet cannot claim otherwise. The fundamental problem is that the FHBs do not perform Due Diligence and then justify it by citing lack of opportunities.

Are they investing only to save their tax dollars?

Come 1st of July and many first time investors will learn from their accountant just how much tax they are paying and how they can considerably reduce it by investing in properties. There you go! It is all the incentive the FHBs require to bet their last dollar but do they probe into the property itself (like say their life depended on buying it right)? NO is my answer. So what research is required prior to buying a property? Plenty actually!

Location of a property is crucial

You must check the location of your property. There are select locations which exhibit higher capital growth. The coast and the city are both good till the time you have got your pick in the right area. Just as capital growth is important rental yield is crucial, too.

Rental yield and capital growth

For this, you have to check with the vacancy rate and the rental return of the neighbourhood you are prospecting. The first shall be very low and the second as high as possible. Before selecting your property, ask your financial advisor whether your portfolio will be motivated towards high capital growth or rental yield because this will determine whether you would want to negatively or positively gear your property.

How much land is beneath the property?

Researching on the property itself is just as significant. How much land lies beneath the property? Remember, land is most likely to appreciate given that there is no more of it in the pipeline. Property, on the other hand, can always depreciate with time. So land is very important. Moreover, just imagine if the land is big you can always go for subdivision and dual occupancy thus allowing you to shelter two tenants and double your rental yield.

When you invest in a property your ultimate aim is to sell it so look for a property which appeals not only to investors but also to owner occupiers, first home and next home buyers. It will give you an advantage when it’s time to sell.

All this requires professional assistance. A seasoned buyer’s agent can take you through the intricacy of the job and make a decision for you based on prudence and not emotion. You can talk more about it through my website.