Unspoken Conversations are the topics that are often swept under the carpet, whispered amongst the closest of friends and bitched about by many. I want to create awareness about difficult things that people face in life; grief, mental health, money, illnesses, family troubles, relationship difficulties and putting yourself first. I want to tell the truth about things that really matter.

Tuesday, 20 August 2013

Buying a Home Versus Buying an Investment Property - How It Differs + Tips and Tricks

Buying a house is like popping your overseas experience cherry; it's addictive, stressful, fun, exhilarating, exciting and every emotion all rolled into one!

That's I guess why, so many people out there are now looking at investing in property, as a way to create future financial stability.

Property to some people, can seem safer then shares, as you have a physical investment to rely upon. However, property can be, at times, like riding a roller coaster, especially as the interest rates rise and fall over time.

Who knows what the property market is going to do - at any particular time.

Who knows if we've reached a peak in property investment, as the purchase prices have soared over the past 30 years, blocking many out of the market all together.

Who knows if the Government is going to continue to give financial bonuses to encourage people to take a chance on the market.

And who knows how long a piece of string is?

But what I know is that property investment is fun, but it's also something that you must think very carefully about, and even sought advice from a mortgage broker for.

My partner and I own two homes, one in a major capital city, and one in a quiet, small little country town.

My partner has always had a financial investment mind, and so, I jumped on the bandwagon as I was swept up in his enthusiasm and determination.

Along the way, we've learnt a thing or two, and I thought I would share them with you.

Buying your own home to raise your family within the walls, and live happily ever after is a completely different process to buying a house for investment.


1. You are more emotionally involved with a home for you and your family. You want the white picket fence, big back yard for the kids to run around in, room for the boat, swimming pool, large spaciest rooms, big entertaining area, spa bath, built in wardrobes, and well, the works, because well it's your home.

When buying an investment property it's best to leave your emotions out of it and to focus on the return of money and cash flow that will come and go. You must think of what renters are looking for; close to schools, public transport, shops, something that's easy to maintain, basic garden, grassed area, built in robes, modern but clean, neutral colours, good location etc. If you buy a house that would appeal to the majority of the population, then you are much more likely to find a renter that falls in love with your house and wants to call it their home.

2. Think strategically. There is no point in buying an investment property where you are going to have to put thousands of dollars of your own money into it. An investment property is that; something that you essentially want to be able to set up so that someone else can pay it off for you (score!) To be able to do this, you have to make sure that the repayments can be covered by rent. There's no point in buying a $400,000 house with repayments of $2000 a fortnight if you can only rent the place out for $1000 a fortnight, unless of course, you are willing to pay your own mortgage and pump money into the investment property too.

3. Consider what improvements you can make to the property to increase your return if you intend on selling down the track. The majority of people are looking for a safe place to park their car, an outside entertaining area, a large, but easily maintainable back yard, clean and tidy fittings and painting, and neat bathrooms and wet areas. Things don't have to be fancy smancy. If you can find a house that is cheap, but requires a little bit of tender loving care, then it's a great opportunity to increase your return. A lick of paint can make the hugest difference, as well as replacing carpet with floorboards, and a dodgy looking backyard with grass. Neat and tidy; cheap and easy = big returns.

4. Short term investment versus long term investment. Are you hoping to rent your property out over the long term or are you looking at buying it, doing some minor improvements and putting it back on the market quick smart for a smaller, but quicker, return?

5. Don't overcapitalise. You don't want to get yourself in a position where you are in debt up to your eyeballs, working like slaves to the bank, breaking your back just to make ends meet. This comes back to being financially smart in the first place. Look around the suburb/town/region and now how much the average person pays for rent per fortnight, and how much property is worth in that area. There's no point paying $400,000 for a house when the market in that town is only selling for $300,000. There's also no point in doing major improvements on a property if it doesn't increase the selling price as you will not get your money back and the time and effort won't be worth it.

Getting local builders advice, as well as mortgage brokers, and speaking to the local council and neighbours is a great place to start. We also looked on realestate.com.au at the buying and renting tabs to check both before we purchased our investment property in Adelaide.

6. If you are looking at buying a 'shack' or holiday rental, then you'll need to be prepared for the rent to be seasonal. You might have to forward think about how much you are going to charge in peak and off peak seasons, and be willing to have to invest some of your money in the property too. These proprieties are 'risker' then having long term tenants, but can really pay off if you advertise well, and charge an amount that won't cost the holidayers an arm or leg, but can secure your return.

7. Think about why you are looking to buy in that place. Is it because you want to claim cheap flights to go and 'check out the investment property' in some amazing location (totally want to buy one in Cairns just to do this)? Is it because it's in a major capital city, and hence there's university students, old and young, etc? Is it in the country and your target audience are families? Your target 'audience' or renters, will affect where you buy, and what type of proprieties you are looking for.

8. Once you've purchased the property, you've then got to think about how you are going to manage it. Will you employ a real estate agent to manage the property and tenants? Will you dive into private rental? To be honest, at the start my partner was all for private rental and I cringed. There's so much more to renting then you'd think; like law suits, renters associations, chasing up repayments, complaints, maintenance requests, inspections, and so much more! In the end we decided that it was definitely worth the coin to have a real estate agent take care of all of the nitty gritty, and we basically just have to say yay or nay to maintenance requests when they are sent through!

9. You've also got to consider things like; are tenants allowed to have pets? Are you looking for families, or young people, or the old? How much are you looking at charging? Are you going to pay for water and council rates? Are you willing to fork out money for maintenance requests, are you going to be doing any improvements on the property that may affect the tenants? (If you have a real estate agent, then they go through this with you!)

10. I guess my final tip is to be smart, but enjoy the ride of property investment; it is fun, it is rewarding knowing that hopefully, down the track, it'll all pay off, it's great to know that our children, if they so choose, will have somewhere to live if they ever move to the city, and well, it's challenging, rewarding and everything in between!

Think smart, budget, seek advice, don't overcapitalise, do your research, consider improvements, and bring your long/short term focuses and goals with you to the property investment table!

Look after yourself and those around you,

Kirsty xxx

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