You may be considering investing in property as a way to grow your wealth – or boost the balance of your self managed super fund. Here are six things to consider before you commit to purchasing a property as an investment:
- Check your risk profile. Ask yourself if you’re comfortable carrying debt and making additional investments.
- Ensure your income is stable and adequate to support the debt if a tenant moves out or unexpected costs come up.
- Develop a life plan that considers events that may arise, such as having children, travelling, studying or changing jobs. You can accommodate these events if you have a clear, documented plan.
- Assess each investment on its own merits and risks. Expected returns – income plus capital gain – must exceed the borrowing costs over the long term.
- Invest in what you know. At least to start, stick to one suburb or city and know the market well, including the public transport on offer.
- Plan to lift the rent. Most properties are sold on a multiple of the yield they produce. Increasing the rent is a starting point to lifting the property’s value.