Step-by-step guide to buying

30th April 2007

Buying an investment property can sometimes prove exhausting and confusing, making a step-by-step guide to the purchasing process a valuable tool for the investor.

Property advisory firm Real Wealth Australia has produced a report titled 16 critical steps to buying an investment property. Among the key steps the report outlines are:

Build a team of experts to support youYou can't be an expert on everything and when it comes to property you can't do it all yourself. That means finding the right experts, such as accountants, solicitors, mentors and property managers, is critical to help you in the decision making process. Make sure your experts are active property investors themselves.

Establish your borrowing position Contact your bank or finance broker and ask them for an assessment of your borrowing position. This helps with working out the type, number and profile of the properties you can afford to buy.

Establish the right entity to buy your property inDecide whether to buy the property in your own name, your spouse's, child's or partner's name, or in some form of trust. Choosing the wrong entity could see you paying more tax.

Establish the right buying strategy Decide whether a negatively geared property, a cash flow neutral property, or a positively geared or cash flow positive property would most benefit your financial position. And which can your current finances support?

Establish your buying rulesNarrow down the type of property you want to buy. Ask questions such as: Will it be a house, townhouse or unit? How many bedrooms should it have? Is a garage a must? How many bathrooms should it have? What yield should it provide?

Find the propertyUse the internet and local agents to track down a property that matches up to your buying rules.

Crunch the numbersFactor in the purchasing costs, property expenses and likely rental income to come up with an estimated net weekly loss or income from the property. See whether it fits with your buying rules. If not, see if you can make it fit.

Negotiate the priceMoney you save through negotiation is money in your pocket rather than the vendor's. In a booming market, set to achieve a 5 to 10 per cent discount; in a flat market, look for 10 to 15 per cent; and in a bust market try to achieve 20 per cent plus off the asking price.

 

© Australian Property Investor magazine - www.apimagazine.com.au. Reproduced with permission. To subscribe to API, go to www.apimagazine.com.au or pick up a copy from your local newsagent.

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