Is now a good time to invest in property? What a great question. If you believe the findings released by general insurer, QBE Insurance, in early October, Australia is set for another property boom over the next 3 years. Adelaide, Sydney and Melbourne are predicted to lead the charge.

Investing in residential property as an investment should be carefully planned and considered.

Some tips to consider:
• Produce a budget. The important factor here is not what the bank will lend you but what you can afford (and don’t forget stamp duty!).
• When completing your cash flow estimates remember to factor in
annual outgoings such as: interest costs over and above rent received, council rates, body corporate, general maintenance etc.
• Location is everything. Trying to predict the next boom area can have substantial upside, but the reverse is also true. Sticking to quality, in demand suburbs reduces risk of property value declines, finding a tenant will
be easier and higher rental returns can be expected.
• Affordability is the key issue for many, but if you can, try and stick to suburbs in the inner city fringe.
• When looking for an investment property, consider the proximity
to public amenities – public transport, parks, schools, and popular shopping areas.
• If the property is currently tenanted, inquire as to what the tenant is paying and how long is left to run on the lease. Having a vacant property is a key risk with property investment.
• If buying an apartment/flat, try to find a property with a secure carpark provided. They will add considerable appeal to prospective tenants.
• Again, if purchasing an apartment/flat, the fewer properties in the block the better. They tend to have a more unique feel about them and can become more attractive to future buyers.

Some traps to consider:
• Prior to purchase, obtain a Section 32 from the agent and have a Solicitor look it over. Think of it as a road worthy certificate for a property.
• Be careful not to forward budget using current interest rates as they are at 30 year lows. Budget for a more realistic rate of around 7.5% per annum.
• Consider the risk of damage to your investment property and/or general wear and tear.
• Vacancy risk. While the property is vacant you will have to fund all
the outgoings.
• If you are a couple, seek professional advice as to who should own the investment. This will have tax consequences from an income perspective and also when the property is sold. This will save any nasty shocks along the way.
• Factor in all the outgoings. Body corporate, council rates, maintenance, interest rates etc. Although they are tax deductible, these can severely impact returns.
• Be wary of negative gearing (when expenses exceed income). Yes it provides a tax benefit, however, a loss still occurs and must be recouped from growth in the property value before positive returns can be seen.