Potential Red Flags to Watch Out for When Buying an Investment Property

Do you get a thrill from house hunting? All the listings, home opens, and what-did-we-just-view emotions. When buying an investment property, there are some things you need to be aware of before diving into the deep end.

While property prices have steadily increased in Australia in recent decades, it’s important to remember to choose your investment property carefully. There is a difference between buying a top-performing property, which may gain value and provide a reasonable income, and buying a struggling property.

As you probably already know, location is an important factor when choosing a property. But there are some red flags that may influence the potential growth of a property.

Be careful of incorrect listings

Don't take everything in a property listing on face value. Just because the listing says there is a feature doesn't always mean that feature will be what you expect. Be sure to do your own research and double check in case something mentioned in the listing doesn't add up, such as the supposed number of bedrooms or parking spaces.

Sometimes properties may be listed for a higher price than those surrounding them due to something in the listing which isn't quite as valuable as it may seem.

For example, a real estate agent may say the property has development potential due to nearby subdivision or zoning changes. But it doesn't necessarily mean that particular property will be viable for development or subdivision and is worth the extra money.

Just remember to do your own due diligence on properties before making an offer and consider including some clauses in your offer to cover your back.

Ask yourself why it’s a long listing

Do you ever wonder why some properties – even when they seem perfect on paper – remain on the market much longer than others?

There's usually a reason. Once again, do your research. There might be something that could potentially devalue the property down the track or cost a significant amount of money to repair.

Sometimes it’s something simple like the seller has unrealistic expectations price wise or may be unwilling to negotiate. But it's best to be safe in case it's one of those 'too good to be true' scenarios. Keep an eye out for things like any potentially quick repair work which could be hiding a bigger repair job. 

That's why pre-purchase checks are often a good idea. And be sure to know your rights and when you may walk away from a potential purchase.

Find out about any hidden costs

Have you ever gone shopping then got to the check out and realised something costs more than you expected? Yeah, don't risk experiencing that when buying an investment property.

While it's easy to find out the asking price of a potential property, there may be some hidden costs involved. 

For example, if you're considering buying an apartment or a unit, check if the property is part of a strata complex. Strata fees might be much higher than you expect. Newer buildings may have fees or levies to fund amenities, such as a swimming pool or gym, and older properties may need restoration or repairs. One way to sus out what kind of expenses may arise is to get a copy of the past strata board meeting minutes.

Consider what could impact the property’s value

While you might be able to increase your property’s value through cosmetic renovations, you should also be aware of things you can't change that may impact your property's value.

Consider things such as whether your potential investment property is situated near entertainment venues or within a high traffic area. It could be noisy or difficult to get in/out the driveway at certain times of the day.

Have a look around and check out the area’s vibe. See if the local council properly maintains things. You could also check the local council’s plans to see if there are any proposed developments or upcoming infrastructure changes.

Depending on the property type and location, potential tenants might expect a bit of noise or traffic but be mindful of things that could impact your property’s value down the track.

If you’re thinking about buying an investment property, it’s time to chat with your finance specialist so you’re ready to put in an offer when the perfect investment property pops up.