Buying your first Northern Beaches investment property. What you need to know

Are you thinking about buying your first investment property in Allambie Heights or another Northern Beaches suburb? Now prices have levelled a little, it’s a great time to buy your first investment property as long as you consider it a long-term investment. In fact, it’s one of the best ways to grow your wealth and set yourself up for the future. Northern Beaches property performs well as an investment; for example, in Allambie Heights, the median rent for houses is $1,045 and the median yield is 2.26%.

Here are some tips to help you purchase your first Northern Beaches investment property.

1. Do your research

It’s important to do your research so that you end up with an investment property that is easy to maintain and lease out consistently. For this, you need to consult a local real estate agent (we’re always happy to advise you) and a reliable property manager to find out what tenants in the area are looking for.

You want to invest in a property that’s going to be in high demand so that the rental income keeps coming in. You also want to ensure that the home or unit that you buy isn’t going to need a lot of updating or major structural changes.

At JDH, we can point you in the right direction to an investment in a highly sought-after area that’s in good condition to give you the best return on your investment.

2. Define your investment goals

You also want to plan out your investment goals. Are you buying an investment property to help fund your retirement? Are you hoping to help your kids into their first home once they’re old enough? Do you like the idea of long-term rental returns? Do you plan to create a portfolio of investment properties?

All of these questions need to be answered in order to make a solid plan for your investment strategy. This will help you to determine your investment goals and how to go about achieving them.

3. How will you fund your first investment property?

As lending is starting to tighten up and interest rates are rising, you need to carefully plan how you’re going to fund your first investment property. This involves putting together a step-by-step action plan.

  • Work out how much deposit you will need. Essentially, you want to aim for a 20% deposit to avoid having to pay Lender’s Mortgage Insurance (LMI). You’ll also find that the larger your deposit, the easier it will be to get a mortgage for the property.
  • Do you need to save or can you use the equity in your current home? Many first-time property investors find that using the equity in their current home means that they don’t have to use much of their own savings to buy their first investment property.
  • Supercharge your savings. If you don’t have enough equity in your current home, you’ll need to think about supercharging your savings as quickly as you can. This involves setting up a realistic budget and putting away as much as you can into a high-interest savings account.
  • Check your disposable income. Remember that you’ll have to apply for a mortgage, so your disposable income will come into consideration. Even if the rental returns will cover the mortgage repayments, you’ll still have to factor in other costs such as rates, regular maintenance, and landlord insurance.
  • Keep your credit card limits as low as possible. You may not be aware that it’s the credit limit of your credit card that most lenders consider when looking at your loan application. For example, most lenders will estimate the minimum monthly credit card repayments as 3% of the credit limit. Even if you pay off your balance every month, this is still something to think about as it may limit your borrowing capacity.

To find out more about buying an investment property on the Northern Beaches, please give the JDH team a call. We’re here to help.

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