The rise of investment property buyers

Their most nominated reasons for doing so are that they believe property is a good investment; interest rates are low; and, it’s a viable way of building wealth for retirement.

While this is a major vote of confidence in property investment, there are a number ways of improving returns, and traps to avoid, according to Lisa Montgomery, consumer advocate at lender Resi.[1]

It’s essential for investors to be able to comfortably afford the costs of owning an investment property, most notably loan repayments.

“Interest rates are at historical lows, and it’s inevitable they will rise again one day. Investors should ‘stress test’ their repayment schedule to see if they could still afford their loan if rates were to rise by say 2 to 3%, or even more,” says Montgomery.

Pay a fair, realistic price and don’t exceed your budgeted spending limit. “Do lots of homework on market prices, which is especially important if you are buying in a market you are relatively unfamiliar with, such as a different city/town or interstate,” says Montgomery. 

Buy a property located near amenities that most renters are going to need or want, e.g., close to employment areas, good shops, schools, public transport, recreational and entertainment areas and medical facilities. Such well-located properties are likely to show stronger capital growth, higher rentals and shorter vacancies than other properties.

Get property and pest inspections prior purchase to ensure the property is sound. If it needs renovation, get builders’ quotes before buying so you what it will cost, and how long it will take, to get it to a rentable stage.

The demand for property certainly appears to be running strong in many parts of the country. According to Angus Raine, CEO of Raine & Horne, “Auction clearance rates in some of our capital cities are consistently above 80 percent, however, I’d urge aspiring investors to note that the ‘average days on market’ - which indicate how fast a property is likely to sell - as being a stronger indicator of the health of a market”.