Guide To Buying Investment Property In Brisbane

If you are in the market for investment property, Brisbane is a great place to start your search. With its close proximity to the CBD and beautiful scenery, this city has plenty of investment opportunities that will suit all kinds of budgets! However before you rush out there with your wallet in hand, here are 10 things to consider when buying an investment property in Brisbane.

1. Why Do You Want An Investment Property?

Investment property in Brisbane provides a great avenue for strong capital growth, but you need to make sure you are making the right decision for where and when to invest - it is important not to rush into any decisions.

It's important that you decide what your motivation for buying an investment property is. Do you want it as an eventual retirement plan? Is it because you want to earn money from it? Or is it simply because you feel like you should own real estate for some reason.

You also need to consider what investment you are looking. Are you wanting a property that is going to be an investment and nothing more, or do you want something with great potential? If it's the latter then there maybe better options out there such as buying commercial investment properties in Brisbane CBD which allow for tenants at below market rent, investment opportunities with a high return and the potential to renovate for higher rent.

Investment Profiles

Regardless of your investment strategy, the property must suit your investment profile. This profile will be different for every investor, but generally speaking, there are three investment profiles:

1. Active Investment Profile: suits investment property that increases rental yield and capital growth over a long investment horizon (5 years+)
2. Passive Investment Profile: suits investment property that has a low purchase price, minimal management time and potential to refinance the investment property at a later date for a lump sum of cash.
3. Specialist Investment Profile: Suits investment property with high capital growth potential, little or no debt and required minimal management time

By understanding your investment profile, you'll have a better idea of the investment property that is right for you.

2. Determine Location

Brisbane is Australia's third largest city with a population of 2.2 million people. With the subtropical climate and beautiful beaches, many consider Brisbane to offer an excellent quality of life. The city offers affordable housing, short commutes and has lots of investment opportunities for property.

Where in Brisbane Should I Buy an Investment Property?

The first thing you want to consider when buying your first investment property in Brisbane is the location. Three main factors that determine the location of your real estate are: Price, Accessibility and Lifestyle. Price, because you don't want to spend all your money on an overpriced home; Accessibility, because you don't want to live too far from your workplace or any other necessary amenities; Lifestyle, because not everyone wants to live in each of the suburbs in Brisbane. Make sure to also consider all aspects of property types in conjunction with location as all investments are not created equal - make sure you know which type of properties work best with your goals and chosen location.

Do Your Research Into Local Markets and Suburbs

Your research is crucial for finding a good investment property. Researching local markets and suburbs before investing will give you peace of mind that your money isn't wasted, as well as allowing the purchase in an area where there are potential returns on growth rather than just being stuck with low-yielding properties. The investment properties close to Brisbane CBD have been proven time and time again to offer a better investment return than those in areas far from the city centre. In fact, there are many other factors that can affect your investment returns such as population growth, unemployment rates and median house prices which all need to be taken into consideration.

TIP: Make sure to speak to local real estate agents who will have knowledge about investment property in Brisbane and investment property values locally.

3. Is This Investment Affordable?

An investment property is a great way to make money. But how much do you need? But how much do you need? There are many things to consider when buying an investment property in Brisbane or anywhere else.

• Consider the total investment, including repairs and renovations
• How much do you expect to make each year? Will this cover the costs of any mortgage repayments or other expenses ?
• Consider tax benefits. You can claim deductions for interest on mortgages as well as depreciation of fixtures installed in your investment property.

Evaluate your investment property needs and whether this investment is affordable. If you can't afford to buy an investment property then don't! You should be able to pay the mortgage repayments on your investment property and still have enough left over for day-to-day living expenses.

The first step for anyone looking at investment properties is decide how much they are willing to pay for an area in Brisbane, This is a very important decision as it determines how much you can afford to spend on the investment property and how much you need to save before you start looking at properties. If you are considering investment property in Brisbane then perhaps set your budget between $300,000 and $500,00 depending on your circumstances. Some investment properties can be purchased for less than, but this is usually the minimum purchase price in Brisbane. Be sure to factor in how much stamp duty and other legal fees you will incur as well as the cost of maintenance for investment properties.

4. What Are The Projected Investment Returns?

Especially as an investment what you need to consider is just how much you are expecting to earn from your investment property over time. With this information, you can get a better idea of if your new purchase will be worth it over the long-term.

A common mistake that many amateurs make when purchasing investment property is that they purchase a property that is already generating income. This may not be the best investment for you, as it may be better to let your investment sit vacant until someone can move in. Renting an investment property out could potentially take anywhere from three weeks to three months. Every property investment should be set up for success by understanding the market, appreciating the risks and correctly assessing your capacity to meet those risks.

Firstly, you need to consider the investment property price in relationship to the rental income it can generate. It is often recommended that investment properties are purchased for a gross yield of 5% or greater on the purchase price. For example if an investment property cost $500,000 then the rent should be at least $25,000 annually for the investment to reach this benchmark. If the investment will be negatively geared it is recommended that you look for property yields of 8% or greater.

5. Securing Tenants

Can you secure a tenant for your property quickly, and at what cost?

Imagine you've chosen your investment property and negotiations with the seller and agent begin. You sign a contract and make an offer. The waiting game begins: will it be accepted, will I have to go back to the market?

It is easy to become discouraged at time goes on, wondering whether this investment property is any different from all the others you looked at, wondering if it would've been easier to secure the investment through a different method.

The good news is that securing tenants can be relatively quick and painless in Brisbane. Unlike other investment property locations, in Brisbane the majority of agents have access to an up-to-date database containing potential renters' contact details. If you have signed a contract with a real estate agent, they will be able to access this database and send out an email or letter to a list of potential tenants. The Brisbane property investment market is very buoyant at present with many renters being unable to afford home ownership in the current property climate. This means that most investment properties are rented within days of being listed.

What Kind Of Tenants Do I Want?

Having decided why you are buying an investment property in Brisbane, the next step is to consider the type of people that you will welcome to your home. Will you welcome students, young professionals or families? It's important because you will have different requirements from tenants in each case and it can be a very long-term commitment.

Sometimes it can take quite a long time to find tenants for investment property in Brisbane who are able and willing to meet the rental payments on time every month. This may mean making sacrifices when it comes to tenant selection and desirability of your investment property, but as long as your investment property is well-maintained and you continue to pay the loan on time you will eventually find the right tenants.

6. Property Management

How will the property be managed once purchased?

Once you have purchased the property, it is important to think about how to manage it. You could find yourself losing money by either hiring the wrong people or managing it incorrectly. Here are some tips for investment property management in Brisbane

Hire A Manager

Hiring someone to act as the middleman between yourself and renters will save you time and stress in the long run. Consider whether you want to hire a professional property manager or work with someone more experienced within your network.

Advertise Your Investment

Take some time to advertise either in newspapers or on relevant websites that list properties for rent. You could also use social media channels to spread the word, which is free and probably the best way to let people know.  

Manage Your Investment Property Yourself

Consider whether you want to manage the investment property yourself and maintain all communication with tenants and handle any maintenance problems as they arise. This could be a good option if you don't feel comfortable hiring someone to do this for you or if it's part of your investment plan.

Learn About Investment Property Management in Brisbane

As with any investment, it is important that you know all there is to know in investment property management and how things work. For example, figure out when your inventory property should be vacant and what investment property management services you will need to have organised. In addition to this, property managers must have a good understanding of the Brisbane property market. They also need to be well versed in property law so that they know how to deal with evictions and other legal issues.

7. Exit Strategies

You have done your research, found the ideal investment property in Brisbane according to your investing strategy and are ready to make an offer. But have you thought about your exit strategies if things go wrong or do not work out? The goal of making a profit on an investment is simple but there are many things that can happen along the way which could jeopardise it. Here's how to avoid the pitfalls of entering the world of property investment.

One important step investors should consider is tying their investments with an exit strategy. This would involve considering your timeline and approach for buying, keeping and selling properties before signing on the dotted line. An exit strategy could be as simple as purchasing a property that you plan to keep for at least five years before selling it at a profit. Investors usually wait until the property has gained 20% in value before considering selling it.  

Learn about the different exit strategies and best practices in the following post below: 4 Different Exit Strategies

8. On-going Costs

How much should I spend on my investment property?

When considering how much to spend on a real estate purchase, many people tend to look to the value of their home as a guideline. But your first investment property shouldn't be anywhere near as big and valuable as your primary residence. For the initial outlay when buying an investment property, you can expect to pay stamp duty, advertising costs and legal fees.

The truth is there are further significant costs associated with owning an investment property, including rates and strata fees, mortgage interest, insurance and repairs.

“It's the ongoing costs that get people - investors generally spend about 10 - 15% less than they can afford to have a bit in reserve for risk management."

It's important to have a realistic idea of your goals when you buy an investment property. Many people make the mistake of over-extending themselves and buying a place that's too expensive for their initial needs. Another pitfall is choosing an area where prices are already elevated, like Brisbane CBD or the Goal Coast. When it comes to investing, not all properties are equal, no matter where they're located.

To ensure that you get your money's worth, steer clear of emotional decisions and put your needs first. If you focus on the destination rather than the criteria that will guide your purchase, you might end up paying too much for a property that doesn't meet your expectations.

Property Care & Management Costs

An investment property requires a certain level of care and management from its owner in order to ensure that the investment provides maximum return. Unlike personal residences, investment properties are an investment that should provide a positive cash flow for you after all expenses have been paid.

In terms of contemporary investment property trends in Brisbane, one area where investors can save money is with regards to on-going care and management costs. A property investment needs attention made to it in order for it to bring in returns. However, you can cut unnecessary costs by doing your research before buying an investment property that requires upkeep.

The size of the property investment as well as its location and proximity to other properties will determine how much care and management is required from you after purchase. For example, investment properties in Brisbane that are located near a large number of other investment properties or residential areas will generally be surrounded by fencing as a regulatory requirement for safety purposes.

You should also note that investment properties in Brisbane located in areas with a high crime rate will generally have a higher level of upkeep because extra security measures need to be implemented to prevent break-ins. The purchase price is just one factor to consider when buying investment property but ongoing management fees and associated costs such as pest inspections, council rates and maintenance costs need to be taken into account too
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TIP: Choose investment properties located in areas where the surrounding area is well maintained and investment property will be lower

9. Inflation

Have you factored in inflation into your calculations when trying to determine a suitable rental yield on investment property?

Buying property is a big investment and you need to make sure it's in an area where where there will always be demand for property. A low yield investment property means you could potentially lose money and rent out your investment but still lose it in the end because of this. You'll also want to consider inflation when deciding on how much you want to charge for rent. The investment property investment has been doing really well in Brisbane and investment property yields have been increasing over the last few years.

How inflation figures into investment property yield?

Inflation is a rate which is used to measure changes over time for goods and services, including investment properties. This means that when you're trying to determine investment property yields for investment properties in Brisbane, you need to factor inflation into your calculations because rental returns will decrease over time.

If you're looking at investment property yields in Brisbane , it might be a good idea to consider investment property yield calculators which can help you work out how much annual rent return (income) is considered reasonable based on investment property investment. Furthermore, investment property yields in Brisbane are usually around 4%.

10. Additional Benefits or Deductions

For many people with investment goals, investing in property is one of the most popular investment choices to make. There are many benefits associated with investment property, including many tax deductions and concessions that can reduce your investment income at tax time. Investing in investment property allows you cash flow from the rent that is received once expenses have been deducted, while still allowing you to receive other investment benefits such as capital gains should you choose to sell.

With investment property there is usually a range of benefits and deductions available to help reduce the tax payable on investment income such as:

Negative Gearing

Where investment property expenses exceed rental income; and

Capital Works

Where construction costs are claimed over a number of years, or capital improvements can be claimed immediately

Investment Property Ownership for Tax Reasons

If you are buying property as an investment, you can claim investment expenses (including GST) that area reasonably related to earning investment income. Investment interest expenses can also be claimed - the interest on the money borrowed used or partially used for investment purposes is tax deductible up to $150,000 over the life of the loan. With investment property you can also claim land tax and council rates as a tax deduction where they relate to investment purposes.

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