What to consider when buying a Brisbane investment property
With Brisbane property prices expected to outperform every other Australian city over the next three years, now is a great time for informed investors to make their move.
Suburb growth rates
Investing in a suburb likely to reward you with strong price growth should be high on your list of priorities as you research the Brisbane real estate market.
Suburbs within a 5km radius of the CBD will continue to be strong performers. Bulimba has had the highest growth rate over the past 10 years of all the inner-city suburbs and shows no signs of slowing down. Other suburbs likely to deliver high growth rates for investors include New Farm, Tarragindi, Coorparoo, and Cannon Hill, among many others.
Brisbane is entering its next growth cycle, and prices are expected to rise 20 per cent over the next three years. Consider the following factors before signing on the dotted line, and you’re sure to come out on top.
Learning who already lives in a suburb can guide your investment decision-making. If a suburb is most popular with families who own their own homes, for example, and you’re hoping to buy an apartment you can rent out, it may be better to look elsewhere. Suburbs that appeal to young professionals or downsizing retirees can have lower vacancy rates and higher growth rates when it comes to apartments.
Rental yield is the total income for the year over the purchase value of the property. It’s important to know this first, because the answer will let you know if you can afford your property loan or not. Seek out an investment in an area that has high rents compared with property values.
Smart investors assess the rental supply and demand of an area before proceeding. Suburbs close to the CBD, universities and good schools often have lower vacancy rates but no matter where you invest, it’s important to factor in times when your investment property may be vacant. This may be because repairs are needed, or it’s taking time to find a good tenant. To be on the safe side, be sure you can service your loan for 6-12 weeks without a tenant.
Some developments can benefit your investment, but others can slow down how fast a property grows in value. A new shopping centre or train line can be a plus, but too many apartment buildings going up in an area can cause an oversupply issue that can impact both vacancy rates and price growth. Ask the selling agent about any upcoming developments and double-check with council before going ahead.
When the cost of owning and managing a property investment is less than the income you’re earning from it, the property can be said to be negatively geared. Those losses can be offset against your other income, such as your salary, reducing the total tax you pay. Negative gearing can be a handy helper for investors, but don’t rely too heavily on this tax break when you’re making your calculations. You never know when the government might decide to remove this benefit, and you need to be sure your finances won’t suffer as a result.
Take into account every foreseeable expense before investing, and you’re far less likely to run into financial hardship later. Along with the purchase costs, factor in maintenance and repair costs, council rates, strata fees, and property management fees. Building and contents insurance is a must, and landlord’s insurance protects you from damage to property, theft and loss of rent if tenants suddenly stop paying. Income protection insurance may seem like overkill, but what would happen to your investment if you were no longer able to work?
With Brisbane expected to deliver such impressive returns over the next few years, it’s the savvy investors prepared to do their homework who will reap the best financial rewards.
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