15/03/18
A property is a solid asset that has the potential to grow your wealth over the long term. However, it’s crucial to invest in the right properties, because making a mistake in this area can cost you, and not just financially.
Property-related hiccups and setbacks can create untold stress, worry and heartache, which achieve the opposite outcome to what successful investing is all about. To help you move forward on your investment journey, here are some of the factors to look for when choosing the right property for your portfolio:
1. Look for growth areas
Capital growth is a significant factor in property investment, so always be on the lookout for areas that are expanding in terms of population, the economy, and local infrastructure. This is why CBDs and their surrounds are in such high demand as investment locations.
2. Invest where you know
This doesn’t mean you should invest in your own backyard; instead it means you should get to know your potential investment location as well as you know your own home neighbourhood. Become an expert in researching the area, from vacancy rates and demographics to council spending and capital growth rates.
3. Hold out for returns
Especially for those whose cash flow is tight, it’s important to buy where you won’t go into the red. While markets like Sydney have been great for capital growth, they are expensive to buy into and just as expensive to hold. Be sure to keep an eye on rental yield trends when deciding on an investment property.
4. Opt for a tight squeeze
When it comes to vacancy rates, look for a tight rental market. Review the latest vacancy rate data on your chosen suburb; investing in areas with low vacancy rates significantly limits your chances of an empty property between tenants.
"Get to know your potential investment location as well as you know your own home neighbourhood"
5. See into the future
Find out what plans are in the works for an area so you can determine what its future looks like. Government and council websites often have information on infrastructure project proposals online, and you can get in touch with the local council for more details. It’s also prudent to keep an eye on any residential developments that could be going up near amenities, such as schools and shopping hubs.
6. Choose low-maintenance properties
Look for a property that is ready to rent out immediately (unless you have big plans to add value through renovating). For instance, houses with pools and large gardens necessitate a lot of care and time, whereas a similar home on a smaller block with a flat, grassed backyard is far easier to maintain.
7. Know what tenants want
Pick a property type that appeals to the people who are actively renting in that area. For example, a small unit may be more affordable than a house, but if the local market is largely comprised of families, your investment property won’t appeal. It will also be to your advantage if a home has useful features for the target market, like off-street parking or proximity to public transport.
Choosing the right investment property requires research, and it’s crucial to study up and glean the facts from as many sources as
you can.
It’s wise to get advice from experienced investors and other experts in the industry, and to be careful not to trust your investment decisions to those with a vested interest in selling you something.
If the person telling you an area is “set to boom” will benefit financially from you buying there, seek a second opinion, fast!
