When Property Investment Can Lose You Money

YNM Real Estate
18 December 2021

You may think that investing in property is a sure thing – given enough time, you are sure to obtain a decent return on your investment, right? Not necessarily. As with any investment decision, you need to do your research and assess your risk thoroughly, before you part with your money.

First of all, you need to choose the right property. Apartment or house? Houses have out-performed apartments over the last few years. In addition, buying an apartment off-plan is risky. Older blocks with fewer units can also be bad buys. If you are considering purchasing any apartment ask to see the financials and minutes of as many corporation meetings as can be provided. Look out for any outstanding legal issues or capital works that might be required in the near future, to avoid a nasty shock later that could cost you dearly.

If you are considering investing in an apartment, look out for company title units, which may have restrictions on how many apartments can be leased to tenants.

If you are considering investing in a house, make sure that the building is structurally sound, by getting a professional to inspect the structure and provide you with a full report. Don’t forget about pests – the cost of a professional pest inspection can be well worth it, as for example, rot caused by termites is hard to spot and can cost tens of thousands to fix.

Location is critical – close to schools, shops, transport and recreational facilities is your target.

The property should be clean and neat with usable kitchen, bathroom and laundry facilities, or alternatively, you should be planning to renovate as soon as possible.

If your intention is to renovate an investment property – don’t over-capitalise. Do your research to understand the market value of comparable properties in the area. Also look at average rental yields and movements in property prices and cost comparisons of properties sold in the area of interest.

If you possibly can, look for properties that do not need extensive renovation. Non-invasive upgrades such as painting, tiling, bathroom & kitchen upgrades, landscaping and so on can add huge value and contribute to a quick turnaround. Time is money, so the faster the turnaround the quicker the return on investment. Stay away from structural changes and stick to existing layouts in the kitchen and bathrooms to keep costs down. If you do have to make structural changes – be sure that after you have completed the renovations, your total investment will be in line with the market value for similar properties in the area.

Renovating or not, don’t pay more for the property than you absolutely have to. The key to paying the right price for a property is good research. Look for a project that will offer good potential capital growth. Thorough research will enable you to spot a great deal at the right price and act quickly. Remember that some sellers are prepared to take a lower offer for a fast, fuss-free sale.

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