When you’re purchasing an investment property, it’s the level of due diligence you do that will ultimately determine your success.
It sounds simple, and it genuinely is – but that doesn’t necessarily mean it is easy.
While there are some issues (such as the presence of asbestos or a murder in the property) that a vendor or selling agent must inform you of, most potential property pitfalls are your job to uncover.
Unfortunately, the financial burden falls squarely on your shoulders if you miss any hidden defects.
So, here’s a checklist of things to keep in mind when you’ve got your eye on the perfect investment property to add to your portfolio…
1. Researching the loan market
Before choosing a lender, do your homework.
Research not only current interest rates, but also the available features (such as offset accounts) and the option to fix your interest rate, and whether extra repayments are allowed.
2. Pre-approval with your lender
Obtaining pre-approval for a mortgage is the crucial first step to buying a property.
Secure your pre-approval before you start house-hunting, so you can act swiftly and make an offer when the ideal property pops up.
It won’t cost you anything, and you can even get pre-approved before you’ve found a property to buy – just apply based on the amount you plan to spend, and the deposit you have saved.
3. Attend open inspections with an eagle eye
Go along to open for inspections with your sensible hat on, and try your best to stay focused even if the property ticks all your boxes.
As an investor, it can be a little easier to ensure you stick to the facts and figures, to avoid getting emotionally invested in the purchase.
4. Put your ‘tenant’ hat on during your search
What are your potential tenants wants and needs?
When inspecting homes be sure to look out for any obvious problems, like cracks or mould, but also look for lifestyle issues.
For instance, take into account which direction the rooms face – west-facing bedrooms will be a nightmare come summertime in some states and territories.
It won’t impact you, but your tenants won’t be thrilled – and the aim of the game is to find a desirable rental property that has potential renters lining up around the corner, is it not?
5. Engage a building professional for vital inspections
Ask any property owner who has watched their nest egg slowly be devoured by termites, and they’ll tell you that pest inspections are worth their weight in gold.
Likewise, your friend who has fallen victim to the perils of rising damp will be the first to recommend an extensive building inspection from a qualified professional.
A building inspector will check out the entire property to identify any issues and ensure the building stands up to the relevant building codes in your state or territory.
This includes the foundations, electrical wiring, plumbing, gutters and roofing, as well as fences, retaining walls, garages and carports.
They can also tell you if the property has been painted with a lead-based paint.
If these inspections uncover any issues, but the property really does tick all the boxes, you can use this information as a powerful negotiating tool to potentially knock thousands off the purchase price.
6. Follow up with a pest inspection
After you’ve found the property you want to buy, you’ve made an offer and it has been accepted, arrange a pest inspector as well.
Pest inspectors examine the inside and outside of the property, including any crawl spaces and roof cavities.
They’ll also take a look around the garden to see if any pests have made their home in the trees or outbuildings of a property.
If they find anything nasty, they’ll be able to advise you of suitable treatment methods, as well as prepare a full report on the issues present.
7. Consider further due diligence
In addition to building and pest inspections, you may also need a surveyor’s report.
The surveyor will be able to tell you the exact boundaries of the property, helping to avoid future disputes with neighbours.
If the property has a pool, you’ll need the pool and the area around it inspected to ensure it meets the regulations in your state concerning fencing, signage and construction.
8. Take one last look
A few days before settlement, you’ll want to conduct a pre-settlement inspection of the property (in person, if possible).
As you look around, make sure everything is in the condition you agreed to when you signed the contract, and if relevant, ensure that the property is vacant and ready for your tenants to move in.
If there’s any rubbish left behind, the gardens have been left to grow wild, or new damage has been done to the property, the seller may be in breach of the terms of the contract, and you could be in a position to delay settlement until they fix the issues to your satisfaction.
You are now officially a landlord – and you’re one step closer towards securing your financial future through property investing.
Make sure you take a moment to celebrate what you have achieved because you’ve earned it.
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