How to own two or more investment properties
Buying an investment property when the market is a little softer can be extremely profitable. But making sure you get a good deal isn’t as simple as it looks.
In a sellers’ market almost any price a vendor puts on a property results in a sale and such buoyant conditions tend to hide “over-enthusiastic” prices. In a moderating market it’s much easier to buy real estate at more realistic prices because there’s more supply than demand.
Real estate isn’t a level playing field, though. There are many sub-markets and each performs differently. Good properties in certain areas can still sell within 24 hours of being listed, whatever the prevailing conditions, so it’s vital that you bring yourself up to speed with the buying tactics used by seasoned investors.
One way that skilled investors get ahead of the pack is to liaise closely with a full service real estate agency.
By letting Nelson Alexander’s agents know what you are looking for, it is easier to get on the inside track to competitively buy rental properties and have them professionally managed to generate the maximum yield.
Nelson Alexander Sales Director Arch Staver says Melbourne’s market has levelled off in the last few months after a five-year run of growth.
He stresses that the market has not weakened and that competitive prices are being achieved for many listed properties.
Mr Staver believes the current, slightly flatter transaction environment is creating excellent buying opportunities for people who may own one investment property and want to buy a second or third asset.
In addition to the more equitable buying environment in Melbourne, would-be investors have another reason to think about boosting the size of their property portfolios.
There is a real possibility that the rules surrounding the negative gearing of properties will be changed after the next federal election, due by 2019. If changes are made, it’s most likely that existing investment properties will be unaffected or quarantined from any rule change.
Mr Staver says Nelson Alexander sales and property management executives are not financial planners and don’t pretend to be: “But we understand property inside out and can help people make the right buy-in decisions and give them the full information on what they can expect as a reasonable return and yield on the property.”
Nelson Alexander assists investors throughout the process of purchasing a property and putting it on the rental market.
The agency provides useful help with depreciating property fixtures and fittings. And because the company’s property managers regularly inspect rental properties they can alert landlords to repainting and repairs that may be needed to be carried out in the medium term or when a property has a tenancy changeover.
Mr Staver says Nelson Alexander agents are able to provide buyers with highly detailed information on particular suburbs to aid investors in making the right buying choices.
“The suburb provides much of the value of the asset because location is always paramount in real estate,” he says.
The best properties should be fail-safe purchases that will always be in demand. For many investors, this means acquiring property that’s reasonably close to the CBD. For others it means opting for houses or units priced at near the median price for their areas, and which are sought-after by both owner-occupiers and investors.
Mr Staver says diversity in a property portfolio is typically the driving factor behind the level of success enjoyed by an investor. He believes there are specific opportunities for some investors to sell a property in an area that has seen sustained capital growth and then buy several new properties in other emerging areas that have sound investment fundamentals.
“You might, for example, currently own a property in Fitzroy that is enjoying very aggressive capital appreciation,” he notes. “But there are other suburbs that are performing strongly but are only partway through their growth trajectory. Ascot Vale has seen a lot of capital appreciation but probably still has a long way to go. It is an inner city suburb, located within a desirable distance to the CBD, with plenty of schools and parkland and has good access to the freeway.”
Areas that perform well over time and properties that have a high land content are often the best buy-in options. With units, the golden rule is to go for an apartment in a popular location with restaurants and transport nearby.
Mr Staver says as Australia heads to the next federal election, negative gearing will be a hot topic.
“One can reasonably expect that if there is to be a change in negative gearing rules, it is unlikely to be a retrospective act,” he says.
“So those who are sitting on the fence contemplating a second or a third investment property, may find there could be some advantage in making a purchase sooner rather than later.”
If you’re thinking about buying your next investment property, the team at Nelson Alexander are here to help.