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Whether you decide to buy a unit, townhouse or stand-alone house – the foundations of investing don’t change. Many first-time investors see property investment as a way to secure some additional tax deductions. But a property chosen after robust research can deliver income and capital growth as well.
Here’s what you should consider when deciding on the right investment property to buy.
Factor #1: The necessary foundations
As an investment, you’ll want to make sure you get financial benefit from your purchase. Look for a property that delivers a good rental yield, low vacancy rates, and capital growth opportunities in the future.
An investment property may provide taxation benefits, but that’s a discussion best had with your accountant. They’ll help you determine whether property investment is right for your situation. Properties are generally seen as a long-term investment, so it’s essential to consider your investment timeframes before jumping in.
Do your research
Make an informed decision by doing your research and arming yourself with real data. Look for reliable data sources online and combine this with firsthand knowledge from local real estate agents, mortgage brokers or business owners. This research will give you the confidence to negotiate the best price for the property. And remember to leave emotion out of the buying decision – this is strictly an investment vehicle for your financial goals.
Novice or seasoned investor, we can help
When investing in property, we generally expect that capital growth will happen over time. But finding undervalued properties is another way to lock in growth. Look for properties where inexpensive cosmetic improvements will make a significant difference to the home’s value.
Factor #2: Tenant appeal
Spend time to understand the demographics of renters in the area and make sure the property you choose will suit them.
The success of your investment relies on rental income. So, ensuring your property appeals to quality tenants is critical. Spend time to understand the demographics of renters in the area and make sure the property you choose will suit them. Families will require something different to single-person households or share houses. The demographics may also indicate how the area will change in the future.
You’ll need to pay close attention to the physical attributes of the house.
– Is the property in good condition?
– Does the house have street appeal?
– Is it a low maintenance property?
– Is the layout functional and comfortable?
– Does it have a neutral colour scheme?
– Are the appliances clean and in good working order?
– How does it compare to other properties in the area?
– Do the bathroom and kitchen need an update?
- Useful reading: How to find and keep good tenants
Factor # 3: Location
Choosing the right location is not only crucial for attracting quality tenants but also for capital growth. Once you’ve found the suburb or town where you’ll spend your investment dollars, look closely for the best pockets within that area.
- Supply and demand for rental properties
- Any proposed government planning or legislation changes that may affect property values in the future
- Crime rates
- Proximity to schools/shops/transport/entertainment
Factor # 4: Historical performance
Be cautious about buying a brand new property for investment as you may not have sufficient historical performance data about the property or the area. The benefit of choosing an older property means you’ll have data that will help you make an informed decision about the returns you could expect from the property.
There are some advantages to buying a new property for investment (lower maintenance costs and an attractive depreciation schedule), but you’ll need to make some assumptions about your returns.
Take the confusion out of investing
Yellow Brick Road Mortgage Brokers help people like you move toward their financial goals every day. If property investment is on your radar, please let us know.