5 questions first-time Property Investors should ask

Article by PropertyMe 6 October 2022

Property investment can be an exciting and lucrative opportunity, and is one that many people throughout Australia and New Zealand consider diving into at various stages of their life. Although investing in real estate offers many upsides to a potential investor, it also requires significant financial and personal commitment, which is why it’s important to plan ahead, consider your options and do your research.

So, if you’re a first-time property investor looking to get into the market, make sure you read this list first. 

From the obvious to the not-so-obvious, we’ve compiled 5 questions that every first-time investor should ask before taking the plunge into the world of property.

1. Can I afford this property?

If you’re a first-time property investor—what is sometimes referred to as a ‘retail investor’—then chances are that you aren’t coming into your first purchase with a huge financial budget. Whether it’s savings, inheritance, or some other windfall, your start-up capital is probably limited and likely to be your own. 

If that’s the case, then the most important question to ask yourself is the most obvious: can I afford this property? You might not be looking at something specific just yet but you’ve probably got a rough idea of what a property is going to cost you and what your obligations will be.

While we cannot offer financial advice, you need to ask yourself (and your financial advisor) what a property is going to cost you in both the short and long term. Will you live in it or rent it out? If it’s the latter, will you be able to afford both your own rent and the mortgage repayments if your tenants move out? What repairs or renovations will be required within the first few years? 

Before making any major purchase, but especially before buying a property, make sure you speak with a financial specialist to figure out whether this really is something you can afford or whether your money is better off being invested elsewhere.

2. Is it in a good location?

If you can afford it and have decided to take the leap and start looking for properties, the next question to ask yourself with any property you look at is whether or not it’s in a good location.

Experienced investors have the skills and knowledge to tell quickly whether a location is good or not, and even what areas will be good in the future. But for first-time investors, this can be a little more challenging. However, there are a few follow-up questions you can ask that will give you a better idea of a suburb’s suitability for real estate investment.

Beyond major statistics like crime rates (ideally lower) and property prices (ideally higher), proximity to major infrastructure such as schools, hospitals and public transport links serve as an effective shorthand for how ‘good’ an area is, and are key things to look at with any property.

Also, do research into what the future might look like for a particular location as well. Zoning changes or planned infrastructure developments can drastically alter the outlook of a suburb and transform an average or bad location into a good one, and vice versa.

Finally, don’t be afraid to trust your own judgment. Ask yourself, would you live here? If not, then it’s likely that other people wouldn’t either, and that is never a good prospect for any investment property.

3. How can I add more value to this property?

Revenue returns from investment properties typically come in one of two ways: through charging rent or by capital gains in the property’s value. As an investor, your aim is to maximise your income through one or both avenues, and to do so you need to look for opportunities to add more value to a property. 

These opportunities can vary from minor cosmetic changes such as repainting or adding new carpet, to renovations, subdivisions or full knockdown and rebuilds. The latter two options are costly and are therefore less likely to be available to first-time investors but they remain on the table nevertheless.

With any property you view, ask yourself how you could add value to it. Can you split one large bedroom into two, or does it just need a new garden and an updated colour scheme? Even something as simple as new taps, showerheads or appliances can massively improve the look and feel of a property, and these improvements can then be reflected in increased rent.

Whatever the opportunities, large or small, never stop looking for them with any property that you’re considering as an investment, as they can make a big difference.

4. What are your long-term goals?

Just like any other investment, property requires well-defined goals and a solid strategy to deliver the returns that every investor hopes to see. In recent years, many first-time property investors have made small fortunes through buying, holding and flipping properties to pocket the capital gains.

But with interest rates rising around the world and property prices dropping in response, this is not such a sure-fire strategy as it used to be, especially for first-time investors. So, if you are considering investing, you need to get clear on your goals: are you looking to make large short-term profits through capital gains, or do you prefer regular cash flow and the relative stability of a rental property?

Deciding on your long-term goals might be the first or last step you take in your journey to becoming a property investor but it is undoubtedly one of the most important. The clearer you can make your goals, the better you’ll be able to develop a strategy to achieve them, and the more success you are likely to have. Again, it’s best to talk to a financial advisor or investment specialist to delve into your specific circumstances.

5. Do you want to manage it yourself or hire a Property Manager?

This is a question that often comes once you’re further down the property investment journey but it never hurts to get ahead of it. Some first-time investors choose to manage their properties themselves as it saves on fees and allows them to keep a closer eye on their investment.

However, it is very easy to underestimate the amount of work that is required of a Property Manager and even having one property under your control can quickly eat into a lot of your time. If you decide to manage it yourself, you will have to be available to respond to tenant requests and emergencies, conduct property inspections, and schedule maintenance and repairs. 

Additionally, you will be responsible for chasing up any late rent payments and making sure that your property is being looked after. If you’re not planning to make property investing (or managing) your full-time job, then you might want to consider entrusting a professional Property Manager with these responsibilities. It’s a reasonable investment but one that will save you a lot of work and stress in the long run. 

If you’re a new or experienced investor, PropertyMe makes it easy to manage your properties.

For first-timers and old-hands alike, efficient property management is one of the pillars of success as a property investor. 

With PropertyMe’s mobile app, easy and effective property management rests in the palm of your hand. Access your information and documents, track your expenses, monitor maintenance requests and so much more. Easy to use and with ongoing updates and support, the PropertyMe mobile app is essential for any investor that is serious about maximising the potential of their property portfolio.

Ask your Property Manager or local agency whether they use the app or head to our website for more information.

Disclaimer:
To the extent any information provided to you in this content constitutes financial advice, such advice is general advice only and has been prepared without taking into consideration your objectives, financial situation or needs. You should consider your needs prior to acting on any advice or making any financial decisions and seek independent financial advice regarding your own personal circumstances.