Under the roof: What to look for in an investment property
At any given time, there are thousands of properties on the market in Australia. As an investor, you can choose a cottage in Devonport, a family home in Western Sydney or a waterside apartment in Brisbane in the hope of growing your net worth.
However, like all properties, not all investment opportunities are created equal. Take a look at how to find the needle in the haystack: a property that will lead to positive equity, sooner.
Location
The property’s city and suburb are one of the most important factors. Choose incorrectly and you face an untenanted space which is nothing more than a money pit. Choose well and you can charge a premium for people to live in the home.
When choosing where to invest, consider:
- The correlation between supply and demand
Are there more homes than people? Will the opening of a new factory or educational institution bring crowds to the area? Are there lots of lifestyle attractions? Don’t forget to look at upcoming land releases and developments in the area as these can lead to oversupply.
- The shape of the local economy
Are local businesses opening or closing? What keeps people living and working in the area?
- What are current vacancy rates like?
Does every street have properties for lease or are there lines around the block with hopeful tenants whenever a home is open for inspection?
- What is local transport like?
People prefer to be able to commute to work with ease. Good access to train stations, bus stops and parking make properties more desirable for tenants.
- Is there a priority growth plan for the region?
Areas like Sydney’s ‘Western Corridor’ and the districts north of Brisbane are high growth areas, with plenty of new amenities being funded by state and local governments. This includes the Bankstown airport in Sydney and new shopping malls and hospitals in areas like the Sunshine Coast.
Features
The way your investment property looks and functions will add to its appeal and value.
Consider the following:
- Owner-occupier appeal
If you did have to sell, would the property appeal to another buyer? Would you live in it yourself? These are great questions to ask of any investment property.
- Structure and foundations
Will your investment cost you greatly in terms of maintenance and repairs? If all your money goes towards remedial work you won’t make any returns on your investment. A building report is essential to ward off unexpected surprises.
- Materials
Look for homes that have longevity inside and out, with solid, robust materials. This means brick structures and tiled floors rather than weatherboard walls and linoleum flooring.
- Block shape and size
If possible, avoid a sloping or hard-to-access block. Properties like this can make it difficult to get to the front door and require more work to maintain, especially when it comes to driveways and landscaping.
- Tenant appeal
Will your ideal tenant want to live in your property? If it is a family home, does it have a garage, generous backyard or separate living areas? For young professionals, the place should have lock-up-and-leave convenience, modern appliances and access to public transport.
Potential
By potential, we mean the ability of your investment to increase in value (without causing you a great deal of stress along the way).
- Cosmetic potential
Sometimes you can find a diamond in the rough, with good bones but an old kitchen, mouldy carpet, peeling paint and an ugly bathroom. Setting aside a budget for a quick and strategic cosmetic renovation may add thousands to the value of your investment.
- Development potential
Could the property be subdivided or a granny flat added? Check local by-laws to see what is possible that will add to your return on investment.
As a final tip, be savvy and look for a property for which you can pay below-market value. Do your research and know the suburb median, then work with a buyers agent to find a ‘distressed sale’. This means the owner is in a rush to sell due to a divorce or defaulting on their mortgage. You can nab a bargain and start working towards your next property purchase sooner.
For help finding the ideal investment property, a buyers agent is your secret weapon. Look for someone who specialises in finding and securing the type of property you are after.
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