We are often asked if it is a good time to invest in residential property. Quite simply there is no yes or no answer to this question. The real question you need to ask yourself is, “is this the right time to invest in property for me?”

There are many different styles of property (houses, units, apartments, and so on) in many different locations (CBD, inner suburbs, outer areas, rural, etc). The choice of property for investment purposes is enormous, so here are six useful guidelines to help you make an informed decision.

  1. Do your sums first

Work out how much you can afford to borrow and what surplus income you have to support the loan plus meet the expenses of holding the property (like rates, body corporate fees, insurance and maintenance). There will be a tax break if you negatively gear but it may be wiser to ignore that and focus on the quality of the investment initially.

  1. Think about your assumptions

What rental will it attract? What capital gain is reasonable? Which direction are interest rates likely to move during the period you plan to keep the property? These can all affect your sums and your attitude to the investment.

  1. Become a local expert

Evaluate the local market. Do your own “due diligence” by checking real estate websites to see what rent similar properties in the area are attracting, tracking property sales patterns and the capital appreciation.

  1. Take independent advice

Many organisations that sell investment property will offer to make the process simple by bundling all the services you need together. Don’t be tempted – use your own valuer, solicitor and building inspector for structural and pest checks.

  1. Be in it for the long-term

You will hear and read about people who made a short-term killing on property investing. You may be one of the lucky ones, but most people hold a property for five to ten years to realise significant value.

  1. Consider how best to borrow

There is a wide range of loan facilities available in the market. Choosing between an interest-only loan and a principal-and-interest (P&I) loan is a key question as an investor. An interest-only loan means you minimise your costs and maximise the interest expense for tax deduction purposes. The return on your investment will come from the potential capital gain. But if you keep the property long term, you will have to change to a P&I loan at some stage, so be prepared for this eventuality. P&I loans are more expensive but like forced saving, if all goes to plan, you gradually increase your equity in the property.

Following these guidelines won’t guarantee a successful investment but they will help you to make the right choice for your circumstances at the right time. And always seek guidance from a licensed adviser.

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.