Property is an attractive investment, and it’s an investment that has shown a good return. This is supported by research from AMP, which shows Australian property has increased at a rate comparable to the share market since 1926, growing at 11.1% per annum.
Property is also a diverse investment, both in terms of type the property and its location, which has the effect of reducing the risk. An ideal property portfolio could include both residential and commercial property and within each of those catagories, a solid mix of options such as inner city apartment, provincial city housing, retail spaces, commercial or office accommodation.
Inspect before investing
Before you dive in and purchase an investment property, you need to do a thorough inspection of the property and keep an eye out for things that are often overlooked when people buy a home. It pays to get professional inspectors to look at aspects of the property prior to purchase. Major problems and faults can cost property buyers many thousands of dollars to fix, turning an investment into a costly exercise in home repair. If professionals can identify the problems before you purchase, it’s possible for you to negotiate purchase price to cover the cost of the the repairs.
You’ll want to do your own inspection, too, so here’s what to look for:
- Explore the heating and air conditioning
These items are often overlooked as buyers get caught up in examining the finishes and the façade of the house. Another reason these aspects get overlooked is the weather – buyers and inspectors are reluctant to ask to extensively test the air conditioning in extreme winter conditions and vice versa.
Home inspection reports often contain a disclaimer relieving inspectors of this liability. To protect yourself, you should get a separate licensed professional to look at these aspects.
- Keep an eye out for roof leaks
Home inspectors examine the roof from the ground or a higher balcony or window, they don’t physically examine the roof to check its condition. While they might note if tiles are missing, they will not be able to guarantee your roof has no leaks. Check the inside ceilings for any stains, sagging and paint touch-ups. These can all indicate problems with roof leaks. To be sure of the roof condition, get a licensed contractor in to assess it. Money spent now can prevent substantial repair costs at a later date.
- Look for fine cracks
Look for fine hairline cracks on the walls. This can indicate the incorrect application of wall plastering when the house was constructed. This cracking plaster will gradually become looser and will need to be replaced.
- Check for corrosion
Corrosion is an indication that leaking is taking place. Look for it on the walls backing onto showers or baths and in the roof gutters. Corrosion in all these areas can indicate that costly replacements need to take place soon.
- Keep an eye open for pests
Hollow-sounding beams, sagging floors and steps can all be a sign of termite damage, which can be expensive to eradicate and fix. Cockroaches are another serious problem. This insect breeds and resides in damp, dark places, such as under the floor of a home. Not many people will think about inspecting the underside of a house on their hands and knees, but having a professional do this for you could pay off. Fumigation to get rid of these pests is an expensive and time-consuming process, so it's going to be worth your while to negotiate and potentially compensate for this cost.
- Dig deeper under surfaces and coverings
If mouldy carpet on warped floorboards concerns you, ask if you can remove superficial facades to take a closer look at any serious problems that may lie underneath.
- Check for asbestos
Ask if asbestos was used in the home. Often it can be found in the roofing, walls and fences. Inhaling asbestos dust can cause serious health problems, so have it professionally removed and see if you can negotiate a lower price to recoup these costs.
- Take a look at the trees
While beautiful, ageing trees next to a home can cause problems with falling branches and be very expensive to remove. Check the state of the surrounding trees and those of the neighbours to ensure your investment property is not in danger of being damaged during a storm or high winds.
- Examine wiring and power points
Old light switches can be a sign of old wiring that soon might need to be replaced, so encourage your clients to look past any ‘quaint’ features which might be hiding deeper problems. Power points can also be an issue if there are not enough of them in the rooms that need them. Imagine how you’ll use each room to figure out if there are enough power points.
- Ensure roof downpipes lead to stormwater drains
Walk around the perimeter of the home and ensure the roof downpipes are leading into stormwater drains. You should also look for signs of past flooding or excess water damage that may indicate the stormwater soakwells are too small or require cleaning.
Finally, before purchasing your investment property, consult a mortgage broker to discuss financing options, like mortgage refinancing, which can provide you with the equity you need to purchase your investment property.
For more information, contact one of our mortgage specialists who’ll be able to assess your current financial position and arrange a pre-approval for them to purchase a property with confidence.
