From Money Magazine, November 2006
Margaret Lomas is a successful property investor, financial planner and author. She owns over 30 properties bought using financial planning principles, not emotions. She says: "We don't need special inside knowledge to pick a property."
Here are "20 must-ask questions" before you buy an investment property:
- What is the cash flow of this property? Have I taken into account all costs and can I afford to support it if it is negative?
- What is the vacancy rate of the area? Start at the Real Estate Institute (REI) website www.reiaustralia.com.au.
- What improvements are being planned for the area? Not all are positive; not many people want to live near a garbage tip or major entertainment venue.
- What is the population growth? Nil or negative growth is usually not a good sign.
- What is the competition? Look at approved development applications.
- Is the property tenant-friendly? Forget fancy fixtures and fittings that will be costly to repair and replace.
- What condition is the property in? Always pay for a building inspection and remember it's tax deductible.
- Does it have furniture? This is a must for a tourism property.
- Is there a body corporate? If there is, carry out a body corporate search.
- Is there a rental guarantee? Remember, a guarantee is only a promise which has no regulatory backing.
- What is the current property management arrangement? What does it cost? Does it work well?
- Is there a leaseback? Even though an operator is your tenant you need to check them out just like any other.
- In the case of a new or off-the-plan property, who are the developers?
- Is there a dual purpose, if this is a niche market (purpose-built) property?
- What is the land availability in the area? Scarcity will lead to higher prices.
- Is it close is a large city? Make sure it's easy to get to the city by both private and public transport.
- How old is the property? Older properties have less deprecation benefits.
- Is the property at market value? Research recent sales.
- Is the town you are considering based on just one industry? Avoid it.
- Are you being commercial in your approach?
For the complete story see Money Magazine's November 2006 issue. Subscribe now.