Purchasing an investment property is a very different proposition to buying your dream home. You’re looking for a solid rental return in addition to capital growth, so how do you ensure your hard-earned investment is working for you in the short and long term?
Here are our top five tips for finding the right investment property.
It may not be your dream home, but even a property that will be rented on your behalf should boast appeal. The key question is would you like to live here? Because chances are, if you would then tenants would too.
Clearly, the more people who can envisage themselves living comfortably within your investment property, the easier it will be to rent, the shorter time it will be vacant between tenants, and the higher price you can command for a tenancy.
High rental yield
Like any property purchase, an investment property takes research. The ideal scenario is finding a property that can command a high, consistent rental yield but will also grow in capital value in the long term.
When considering potential properties, take the time to research the rental market. What else is vacant in the area, what rental price do properties command, what features of the area tend to attract tenants?
Once you’ve assessed these criteria and can find a property with a rental price that is high in comparison to the purchase price, then chances are you are looking at a property that may also experience good capital growth.
Proximity to transport/ services
On the note of capital growth and rental appeal, properties in proximity to transport and services are often attractive to prospective tenants and future buyers alike. So, imagine and research the types of tenants you are likely to attract.
Are they young families where proximity to schools, shopping centres and medical facilities may be important? Are they commuters who need access to train stations, or are they university students who will be catching the bus to the local uni?
All these factors affect the demand for your property as well as the type of investment property that may suit, determining whether it should be a three-bedroom house, townhouse or unit.
A key issue to also consider is the permanency of employment and industries within the region as these impacts long-term interest in your property. For example would an economic slump of one industry have dire consequences as was witnessed in a number of regional areas after the mining boom?
Regardless of what property you select, ensure it is easy for your tenants to care for. In houses, this includes a garden that is welcoming yet low maintenance.
It may also involve an initial outlay on your behalf to update items like white goods, kitchen benchtops or bathrooms. If you are undertaking minor renovations prior to renting a property, do not overcapitalise, but ensure areas you focus on are appealing to tenants.
If there are areas of the property like gardens or pools that will require extra effort to care for, factor this into your rental assessment and consider the provision of monthly garden and pool maintenance as part of your lease obligations.
While renting a property provides ongoing income, arguably the real investment pay-off is in the capital growth over the years. That means assessing the long-term potential of the region in which you are investing in line with how long you intend to own this asset.
As with any property purchase, research any planned developments or initiatives for this region that may impact your property price in the future.
About United Strata
Specialising in the Macarthur region, United Strata offers professional yet personalised service for buyers, sellers, landlords and tenants alike.