15 things to consider when buying your second property

Buying a second property can be a great investment to increase wealth over time, but it's important to do your research and consider all factors before deciding. Here are 15 things to keep in mind when buying your second property in Australia:

1. Location: The location of the property is one of the most important factors to consider. Look for areas with strong rental demand or potential for capital growth.
2. Property type: Consider whether you want to buy a house, townhouse, apartment or land. Each type of property has its own pros and cons.
3. Budget: Investigate how much you can borrow, set a budget and stick to it. Don't overstretch yourself financially, as owning a second property comes with additional costs such as maintenance and insurance. Make sure you budget for the ongoing payment of land tax. This is something that is typically not required to be paid on owner occupied properties in Australia. Land tax is generally determined by relevant State or Territory's Valuer General and is based on the determined land value. In some areas land tax can consume a large proportion of any rental income that's likely to be earned from the investment property.
4. Purpose of purchase: Are you buying the property as an investment or as a holiday home? This will affect your decision on location and type of property.
5. Rental income: If you're buying the property as an investment, consider the potential rental income. Look for properties in areas with strong rental demand and calculate the rental yield. If you're looking to buy something to take advantage of short-term rental demand, research what nightly rates you can expect to achieve in both high and low seasons, the supply and demand, and who your clientele may likely be (eg. holiday goers and/or working travellers.
6. Capital growth: Consider the potential for capital growth in the area. Look for areas with strong economic growth and infrastructure developments.
7. Tax benefits: Look into the tax benefits available for property investors in Australia. These can include deductions for interest on the mortgage and depreciation of the property.
8. Home loan interest rates: Compare home loan interest rates to find the best deal. Keep in mind that interest rates can change, so make sure you are prepared for an increase.
9. Property condition: Inspect the property thoroughly and consider any repairs or renovations that may be necessary. This will affect your budget and may impact the rental income or capital growth potential.
10. Strata fees: If you're buying an apartment or townhouse, be aware of strata fees. These are additional costs for maintaining common areas and can vary significantly between buildings.
11. Body corporate rules: Be aware of any rules and regulations set by the body corporate of the property. These can include restrictions on renting the property or making alterations.
12. Insurance: Make sure you have adequate insurance for the property. This will protect you against damage, loss or liability.
13. Legal issues: Have a conveyancer or solicitor review the contract of sale and check for any legal issues with the property. This can include zoning or building regulations. Make sure your legal representative is registered to practice in the State or Territory that you're buying in.
14. Market research: Do your research on the local property market. Look at comparable sales and rental prices to get an idea of what to expect.
15. Timing: Timing is important when buying property. Consider the current market conditions and whether it is a buyer's or seller's market.

 By considering these 15 factors, you'll be well-prepared to make an informed decision when buying your second property in Australia. Remember to do your research, set a budget, and consult with professionals such as a property buyer, accountant or financial advisor for their expert advice. Yard can help you understand how much you can borrow for an investment property.