Chapter News

Focusing on the investor

By Nita Arora-Parkes - Managing Director of Location Relocation Pty Ltd

A buyer’s agent can offer the investor some useful tips. Here are some important ones to keep top of mind when advising clients.

As buyers’ agents, there are many different types of property purchases we may be asked to help our clients with. There’s the family home, the holiday home, the downsizer and the investment. They all require a slightly different focus. While buying a place of residence is an emotional decision, buying an investment property is purely a business transaction. Therefore, it is important to make your clients aware of the difference. Before they fall in love with a property, you need to help them make the following decisions:

1. What is their investment strategy?

Do they want to make money from the rental yield or capital growth? Most suburbs do well at one or the other. Is this a long-term or short-term strategy? This will help them decide on the kind of property they want and area they want to buy in.

2. Which location?

The area in which the property is located will affect the return they get. Look at buying in areas that have a thriving infrastructure for an easy commute to work or schools, or up-and-coming suburbs. Catchment areas for good schools are always popular. Show them the facts and statistics about suburbs that have a history of good rental yield or capital growth.

Your client needs to be aware of future development plans and zoning for a chosen area. This could indicate a growth area or an area that people will want to move out of. Much of this can be sourced from council and government websites.

3. What type of property?

Do they want a unit, townhouse or house? One bedroom or two? Off the plan or existing? Old with character or new and modern? Renovated or unrenovated? Much of this will depend on their budget and timeframes. Consider the resale factor and the ageability of the property.

4. What is their upfront budget?

Be clear about the amount of money they want to invest and stick to it. Ensuring they have pre-approval on their loan will provide clarity on this and save time and effort later. Include all upfront costs such as the solicitor’s fees, pest inspections, building inspections, stamp duty etc.

5. What is their ongoing budget?

Make sure the client is aware of the ongoing costs related to having an investment property. These include rates, loan repayments, home insurance, repair and maintenance costs for upkeep, body corporate fees if a unit and property management fees. If the strategy is to sell, they need to factor in Capital Gains Tax.

6. Adding value

Keeping the investment property updated and modern can ensure the client can charge market rate for rent. Adding value to the property can also result in an increased value should they choose to sell. Also remember that they can claim depreciation on their fixtures and fittings.

This article was first published in the March 2013 edition of the Real Estate Journal.