Due diligence is essential before you invest in a rental property. Make sure you do some of your own research& cross checking. Property investing is always a moving dynamic so use this checklist to help you understand more:
1. How can property investing in Melbourne be affected by Infrastructure?
New infrastructure projects can be beneficial or detrimental to your investment property. Find out what’s being planned and when it’s due for completion by login go to www.infrastructureaustralia.gov.au This has links to all state infrastructure planning departments.
Key projects to look out for to support your property investing decisions could be things like new railway stations and train lines, new freeways, new hospitals, new schools, new shopping centres. Property investing in Melbourne in 2019 as an example shows there are major infrastructures works underway and in the pipeline.
2. Should I get an independent valuation before property investing in Melbourne?
A property’s selling price doesn’t mean it’s worth it. Getting an independent property valuation is a good way to assess the property’s true worth and then use that to negotiate on the price.
This can help investors negotiate the best price, reduce risk and save money.
Depending whether you are working with an accredited Property Investment Advisor or not this may be included in their own due diligence for you and could save you money along the way!
3. What’s happening in the local property investment market?
What’s happening in the local area can directly impact the property market – either negatively or positively. The best way to find out is just get out there yourself.
Go to the local shops, look for the standard and style of retailers there and assess whether gentrification has taken place or is about to.
I recently drove into an area some Melbourne Property Investors were interested in and it proved to be a valuable exercise as I found out so much more about the area just from being there and talking to people.
It’s also wise to look at local demographics, employment drivers in the area – take a look by searching on some of the Australian Bureau of Statistics’.
4. How to assess the rental potential when property investing in Melbourne?
It’s a good idea to get one or two rental appraisals if possible.
A good property manager is key to helping your property investment work. They usually give you a predicted average rent say $400 to $440 per week. I tend to work my numbers out based on the lesser amount.
Just because an agent says a property will earn $400 a week in rent, doesn’t mean it will.
5. Are you after Capital gains or Rental return?
You need to consider whether you are chasing rental returns or capital gain and in the case of multiple investments, it should be the latter.
The rental income will help you hold the property, but it won’t help you buy again.
Capital gain should be, in the early stages of investment, top of your list because it will allow you to potentially buy your second or even third property.
Most of my clients who are property investors have capital growth as their main investment criteria followed by rental return next.
If you look for high rental return as opposed to high capital growth, you could be sitting there a long time before you have any equity to do something else.
6. Is there competition when property investing in Melbourne?
Of course there will be. Avoid a market saturated with investors as this will reduce your chances of successful rental returns. This will also create issues around capital appreciation.
If you are investing in house and land or townhouses in major master planned estates have your solicitor check the covenants in the contracts to see what the ratio of owner occupiers versus investors is. A general rule of thumb is around a 70/30 ratio.
Exercise caution in big apartment blocks (Personally I stay clear of these high rise multi-level apartments).
7. What’s included in the title search?
Don’t assume everything is included in the sale. Make sure you identify what’s for sale – including parking spaces and storage facilities – and ensure this is reflected in the title search.
Before you commit to property investing in Melbourne hire a professional solicitor or legal conveyance to cross check the contracts for you prior to purchasing your property investment.
8. What’s the state of the accounts?
You must have these upfront and ongoing costs disclosed and it pays to have them cross checked by your legal team prior to purchasing an investment property.
Properties on strata plans incur a monthly maintenance charge, which is deposited into a sinking fund and used to pay for the lifts, grounds and carpets.
Ask to see the Body Corporate Disclosure (it’s a legal right).
9. Who’s your target market?
It’s essential you identify your potential tenants when property investing in Melbourne. It pays to know what they would be looking for in a rental property.
If you’re going for the family market, look for a large home, with a garden and spacious communal area. Master planned housing estates are generally attractive for families, they look safe, have large open spaces, community facilities and usually have brand new schools being developed in the areas too.
10. How much work is it for you?
If you buy a new property investment in Melbourne you should be good to go – in other words it should be TURN KEY. This means everything is fully completed ready for a renter to move in the day you settle the property. This means it is low maintenance and should be covered by a 7 year builders warranty (If you’re property investing in Melbourne or Victoria)? Please check for other states.
Finally make sure you have a TEAM of quality advisors.
Ready to take the next step?