There are plenty of questions you should ask before buying an investment property. Source: Supplied
FROM property investors who mortgage themselves up to the eyeballs only to sell in a couple of years to seasoned buyers who have created secure nest eggs for retirement with brick and mortar, Adelaide’s real estate experts have seen them all.
So what are their tips for first-time investors?
Real Estate Institute of SA president Ted Piteo says the number one rule is to determine borrowing capacity including allowing for unexpected costs such as maintenance, especially with older properties.
Then look for a property in that price range.
“Buy for the medium-to-long term, five or more years,” Mr Piteo says.
“Growth has stagnated in the past couple of years here. Consider buying investment properties like putting money into your super and don’t touch it for years.
“Personally, I like properties closer to town, which usually have better capital growth. But you have to consider what you can afford. If you are more interested in the rent than the growth, you might buy a property in the outer suburbs where you pay less for it but still get good rent.”
Mr Piteo says there are good investment buys in all direction of the CBD.
Along the southern corridor with all its improvements to infrastructure, is a good investment zone as is 8km north of the city in areas such as Northgate, Oakden and Enfield.
Mr Piteo says these inner-northern suburbs offer newer properties at affordable prices.
Even cheaper to buy are properties in the outer north that provide good rents although they are often old, requiring more maintenance but less depreciation that can be claimed on your tax return.
The western and eastern zones also have affordable pockets to invest in, Mr Piteo says.
“Do your own research but nothing beats talking to a real estate agent who knows the local area as far as rents and purchase prices go,” he says.
Do your research ahead of buying any property. Source: Supplied
“Another tip is to make sure you get a tax depreciation schedule done on the property so it’s clear what you can claim when it comes to doing your tax return.”
Phil McMahon Real Estate managing director Phil McMahon say there are many good investment opportunities in Australia whether the real estate market is booming or not.
“The Sydney real estate market can be one of extreme highs and lows. The Adelaide market doesn’t have extreme highs and lows and has shown over the years to be very stable,” he says.
“However, investing in Adelaide still requires the buyer to be astute. You will still need to do research in regard to comparison sales, the number of houses selling and so on.”
But a word of warning, stay away from the “renovator’s delight” if you are not a handy person.
“You could find after inspection that it may take a lot of work,’’ Mr McMahon says. “Perhaps many years of frustration and money.”
Another possible pitfall for the first-time investor is buying a property based on what they would live in. “True investors buy on rental yield, capital growth and possibly development potential now or later,’’ Mr McMahon says.
“They also generally select areas of Adelaide that they know well.
“Residential real estate is the opposite of shares … lower socio-economic areas generally can produce high per cent rental returns and low capital growth, while blue chip suburbs produce low per cent rental returns and very often high capital growth.”
LJ Hooker SA manager Rod Adcock says location is the key to property investment.
“Choose a suburb where there is a track record of year-on-year growth, taking into consideration fluctuating markets,” he says.
“Any real estate agent will have access to sales data over a period of time to give the investor an educated guide. Also ask for rent values as that will determine the investment return on capital outlay — your buying price.
“Rent yields of around 3-5 per cent gross should be the aiming point.”
Once you have chosen your preferred suburbs never buy the best house in the worst street.
“An investor needs to let the higher-priced houses in the street drag up the price of their investment property,” Mr Adcock says.