Home Truths /How to get started with buying an investment property

Buying an investment property

3 min read | 14 May 2021

Buying an investment property
Buying an investment property

Why jump into property investing and where to start if you're keen

The ‘property investor’s club’ has shifted as more Australians are cottoning on to its benefits.

Keen to join? Here you’ll find answers to the common questions about what’s in it for you and how to get started.

But first, the definition 

Whether it’s a house, apartment or commercial premises, an investment property is a place you intend to make money from and don’t live in. It could be your only property, your second property, your third or more.

Why jump in

If you’ve done it before, as an owner occupier you know the drill when it comes to buying property. So your insights regarding local suburbs, property pricing and even how to slay at purchase day will go a long way towards helping you jump in with relative ease.

Plus there’s your investment plan, the primary endgame for property investors. 

1. Tax time and negative gearing

The tax offsets that come with investment properties are many, including expenses like building insurance and maintenance costs. And if the property runs at a more sizeable than expected loss – for example it sits empty for a bit – you may be able to drive down your taxable income and pay less tax. 

2. It’s all relative 

Property investing is a relatively reliable option from both a property values going up and rental income perspective. Your investment should remain in shape give or take market fluctuation – though markets as you know are always subject to change. If you choose wisely and people want it, they rent it or buy it from you. 

3. Work with what you got

If you’re already a homeowner, chances are you have equity up for grabs – i.e. the difference between the outstanding amount on your home loan and the value of the property securing your loan.

While you still need to be able to cover the deposit and purchase fees like stamp duty and property registration, with equity you could buy an investment and keep building your property portfolio. 

4. Add value on a shoestring

If you plan to fix and flip it for a profit, perception is everything. And it doesn’t need to be a knock-down-rebuild to get bang for your investor buck. Small changes such as repainting the walls, updating the bathroom fittings and ripping up questionable carpets can add surprising value at comparatively little cost. 

5. Who pays your home loan? 

Remember, it’s not only you who’ll be paying that home loan. If your investment is a rental, you can use said rent to help pay it down. And as the mortgage goes down, your equity could go up. And you could invest again. And again.

How to get started

Here’s the 1, 2, 3 for going from here to investor. (Noting that everyone’s circumstances are different.)

1. Understand your investment purpose

Your investor purpose helps you land on what and where to buy. With this in mind, think about whether you want to make money by investing in property through recurring rental income or by selling it once its value increases.

Your best bet at this early stage is to talk to a financial adviser, as they can help answer questions about your situation and walk you through the tax considerations. 

2. Get borrowing power and pre-approval

To focus your property search even further, figure out how much you could borrow. You can use our calculator for a ballpark right now, then secure pre-approval once you’re getting serious.

Whether with us or someone else, pre-approval allows you to move faster should the right place come along. As the on-paper tick that you meet the criteria for a loan, factors considered by lenders for pre-approval include your income, assets, liabilities and living expenses. If you have equity in a current place, this will come into play too. 

3. Find the right investment

Knowing why you want to invest and how much you could spend, you can then get stuck into the property search.

Don’t rush it. Talk to the neighbourhood, have coffee with the most sought-after agent in the area, find out what’s in low supply and high demand.

Look for areas with infrastructure on the rise. By searching smart and focusing your energies on the best property types and neighbourhoods for you, you’ll be able to find the right investment in no time. 

Get scoping

Investing for many is best scoped with the aid of an adviser before you jump in.

Find yourself a property or finance expert, take a look at our calculator to see what you could borrow, and start exploring your neighbourhood and beyond. The right place is out there.

You’ve got nothing to lose except your home loan!

Start saving a whole lotta time and money

Athena acknowledges the traditional owners of the land on which we gather the Gadigal people of the Eora nation. We acknowledge that sovereignty was never ceded and respect their continued and continuing connection to this place.