What are your buying rules?
When buying an investment property having a plan and adhering strictly to those rules is mandatory for a successful outcome.
Property investors may have buying guidelines that include a net yield for cash flow, buying below market value and or buying in a suburb for capital growth.
What About Due Diligence
As a Property Manager, I often see due diligence is taken far too lightly. The property investor ends up with repair & maintenance costs that should be detected before going unconditional.
If your due diligence is thorough, this gives you options to either pull out of the deal or negotiate harder to allow for the upfront costs you will need to set things right.
I.e. the roof may be leaking and need a re-roofing, or some of the electrical wiring may be dangerous and need replacing.
If in doubt, building and electrical wiring reports are essential components, particularly in older houses, as you do not want your property investment to turn into a liability.
The local council is a must to check the property envelope for consents etc. Depending on the age of the dwelling, the council may have only limited information; you may want to consider a LIM report.
It’s important to check the property envelope at the local council for consents etc.
Depending on the age of the dwelling, the council may have only limited information; you may want to consider attaining a LIM report.
Keep Asking Questions
Go to any property seminar or read a book on Property Investment, and you are bound to hear or read, “be an expert in the area where you want to buy.”
Whether you are investing out of town or locally, they encourage you to leverage the expertise of professionals such as Buyer’s Agents, Registered Valuers, Real-Estate Agents, Building Inspectors, Property Managers and Mentors.
It’s not just about knowing house prices, buying well, and being aware of market rent.
It is also about asking questions like the ones below before buying an investment property; this is even more important when rental supply exceeds demand. In other words, when the rental market slows down dramatically.
Due Diligence Checklist
- How many weeks per year have you allowed for vacancies?
- Higher vacancies can happen for several reasons other than supply & demand, e.g. multiple dwellings on the same property, poor location, and poor condition.
- Multiple dwellings are great for cash flow; they generally need expert management to keep vacancies low.
- Where are the schools? What is the school zoning? Has the school got a good reputation?
- What about nearby shops and other services?
- Is there public transport, i.e. Bus stop handy?
- Is the property close to a busy road, intersection or train line or corner section? (This may put some tenants off.)
- Does the property meet all the healthy home standard requirements?
- What form of heating is there? Is it sufficient?
- Is the property insulated?
- Is there an extractor fan in bathrooms and a range-hood over the oven to help control moisture levels?
- Are there mould and condensation issues?
- Is the property cold, drafty or feel damp? Are there thermal drapes?
- Do you need to install a ventilation system, heat pump or log fire?
- Are door locks secure? Is there security lighting?
- Do windows open & shut?
- How many bedrooms?
- What about the house layout? Is the lounge awkward for placing furniture?
- What is the size of the section & is it fully fenced? Are the lawns huge? Is it feasible to pay someone to mow them and include grounds in rent?
- Is there garaging, a carport, and or what off-street parking is available? Is there sufficient storage inside & out?
- Does the property need a spruce up?
- Has it been renovated, refurbished? (particularly kitchen & bathrooms)
The list goes on.
If you find this a little bamboozling and you need help buying an investment property.