Buying an investment property can be an overwhelming process, especially if it is your first time researching property investment. That’s why we have put together the top 5 things you should consider when making this purchase for your future.

Clarify your goals and do your research

Smart property investment starts with asking yourself, why am I investing in the first place? Will buying an investment property affect my lifestyle and current circumstances? You’ll need to decide whether you’re buying to make an income now, or as a longer-term investment. Researching different property types and suburb profiles will help you clarify what you’re after.

When you have found a property you are interested in you can then research the property’s potential for capital growth, rental income and ongoing costs.

Choosing a property type

Apartments, units, townhouses and smaller homes are attractive options for investing in property. If you’re keen to renovate, find a property that could use a little TLC to increase its value over time. Properties that have a wide appeal and many features will make it more attractive to potential buyers. For example, a property near shops, transport and with a garage and second bathroom will appeal to families, retires, couples and single professionals.

Where to buy?

Buying in a familiar area you have grown up in or lived in for a while will take you less time to research. Speak to local real estate agents for their take on the area and check recent sale prices to give you an idea of what you can expect to pay for local properties.

New suburbs and estates are growth areas where there is potential for capital gains and higher rental yield, that is properties with higher rent compared to the property value.

Find out about the vacancy rates in the neighbourhood. A high vacancy rate may indicate a problem with the area which could be anything from crime to inadequate infrastructure and public transport. Buying property in an area with high vacancy rates could make it harder to rent the property out, or sell it in the future.

Look at the local government website to find out about proposed changes in the suburb that may affect future property prices. Things like new developments or zoning changes can affect the future value of a property.

Consider the costs

Aside from the purchase of the property, there are initial and ongoing costs that first time property investors need to be aware of. We’ve broken them down for you here.

Initial

  • Loan deposit
  • Loan Establishment Fees – these may or may not be applicable to your investment loan.
  • Mortgage Insurance – only payable if your deposit is less than the amount required from your financial institution.
  • Utility Connections
  • Stamp Duty - Stamp duty costs will differ from state to state and will depend on the purchase price of the property. Use our stamp duty calculator to estimate stamp duty costs.
  • Legal Costs – transfer of ownership of the property title will require a solicitor or conveyancer.                

Ongoing cost of investing in property

  • Insurance (Building & Landlord) - Building and landlord insurance will not only protect you from unforeseen building damage (i.e fires or flooding), but also common tenant problems i.e. damage or the tenant refusing to pay rent. Check tenant damage is included in your cover.
  • Yearly Mortgage Fees – these may or may not be applicable to your investment loan.
  • Land Rates                                
  • Body Corporate Fees – may be applicable if you have bought into a townhouse, villa or unit.
  • Mortgage Repayments – if rental income doesn’t cover all of your repayments, you’ll need to budget to cover the shortfall.
  • Utilities - You can opt to pay only the connection services. Discuss the best option with your property manager.
  • Property Management – property management fees can vary, they generally charge a letting fee and a management fee based on a percentage of the gross weekly rental. This is usually between 5 – 12 percent.
  • Repairs Ongoing/varies - As the landlord, maintenance is your responsibility. Some repairs are tax deductible so it’s a good idea to keep all receipts and invoices.

When is it the right time to buy an investment property?

The best way to invest in real estate is to find the right time for you. This will depend on you affordability and borrowing power. If you have extra savings, have found a property at a reasonable price and mortgage rates are low, it could be an opportune time to buy an investment property. Having equity in your home will also appear favorable to a lender as you have reduced the amount od debt owing. Speaking to a financial planner and accountant to assess your situation is a good place to start to help with decision making.


Let our team at Horizon get you on the path to property investment success. Get in touch with us today and let us help you on your journey.

The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant Product Disclosure Statement and Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank.