A guide to purchasing your first investment property

So, you’ve made the decision to buy an investment property and help secure your financial future, and perhaps that of your children - congratulations! There are some big decisions that need to made, such as do you buy off the plan? Do you buy a house or a unit? Which area would yield the best return and potential long-term capital growth?

Let’s get started and weigh up the associated risks as well as all the benefits.

1. Purchasing off the plan means you can lock in the ownership of a property, without having to settle for an extended period of time. It may be one or two years before settlement, so capital growth can often make your initial deposit more valuable in the meantime. The risk here is that the value may decrease in this time, so it is important to be sure about the area, not just the property. If you intend to hold the property long term, value fluctuations in the immediate future may not overly concern you. Tax benefits include depreciation on items like fixtures and fittings along with a seven-year structural guarantee at the time of completion. Erring on the side of caution, buying off the plan is in essence buying a concept which means there’s a risk involved with developer’s going bankrupt before completion, in which case you may lose your deposit. If the market value is significantly less, then you may have to come up with the extra cash for the shortfall as banks will cap their lending to the maximum LVR (loan to value ratio) against the current market value (not against the purchase price). There’s also unknown is Body Corporate fees that will need to be established post-completion if you’ve buying a multi-unit development. Taking in all the pros and cons, the benefits show that buying off the plan can be a strategy that works for many investors. Naturally, you have to do your own research to ensure that the numbers work for you, including finance, return, growth potential, gearing and depreciation benefits.

2. Buying an established residence. One thing that remains true whether you buy off the plan or an existing home, the area and close proximity to a wide range of amenities is extremely important. When renting, people can often be more selective about where and what they rent, so well-regarded schools, easy access to transport, local parklands as well as major shopping destinations can play a big part in their decision-making process. A good rule of thumb is if it’s sought-after for sale, then it’s likely that it will also be highly sought-after for rent. Historically, suburbs close to the CBD and easy access to transport have always delivered high returns and low vacancy rates. At the end of the day, it is an investment property, and you’re buying it mainly for the rental returns and the likely capital growth. Keep that uppermost in your mind at all times.

Central Living Developments are leaders in their field and have long been recognised for their commitment to sustainability, unprecedented luxury and exceptional craftsmanship in all of their projects. Predominately working in the south-eastern suburbs in well-established areas such as McKinnon and Brighton; you can be assured of their commitment to delivering a world-class living experience close to the leading lifestyle amenities.

Disclaimer: The information contained herein is to be used as a guide only. Although every care has been taken in the preparation of the information, we stress that particulars herein are for information purposes only.