Assessing whether a property is better than another requires a big picture point of view, expert assistance and clarity around indicators for growth that will help build your portfolio. When purchasing your next investment property consider the following 10 top tips:
1. The investment property is suitable for the local demographic
Know the demographics of the area and purchase a property that will be in high demand. If the area predominately has families and you purchase a 2-bedroom unit, you may experience an extended vacancy period.
2. The investment property has ‘several’ standout features
The more features your investment property has, the more attractive it will be to potential tenants and therefore, likely to command a higher rent. Look for features such as: newly renovated, parking, security, lawn & pool maintenance included, NBN, additional appliances, ready to move in with minimal maintenance required, across the road from a school, around the corner from a shopping centre or a railway station.
3. Seek out a property on a manageable block size
When you purchase a standalone house, ensure that the block size is not too large for a tenant to care for, otherwise you may find it harder to rent. Most tenants don’t like to look after yards, so make the choice easy and find a land size that’s small enough for them to manage.
4. Choose a location where government spending is happening
It can be risky to invest in areas with an intended growth forecast as governments can change their minds. Instead, look towards areas where millions (or sometimes billions) are already being spent, which is an indicator for capital growth. This includes construction of airports, schools, railway stations, hospitals, health hubs and major arterial road upgrades, which can lead to thousands of jobs and future population growth.
5. Strong capital growth potential
It is not always easy to predict this without expert help and research, but ‘capital growth potential’ increases property values, providing you with greater equity to purchase future investment properties.
6. Select an area where employment opportunities are high
Most people like to live close to where they work, so consider buying an investment property close to an employment hub to maximise the chances of a strong on-going tenancy.
7. Future development opportunities
When purchasing an investment, consider how its’ future development can strengthen your portfolio. E.g. Through subdivision or adding a duplex.
8. The investment property is in a good condition
It is a must that you carry out a building and pest report to identify any costly issues that cannot be seen by the eye.
9. Avoid areas with an oversupply of rental properties
Research the area to find out if there are new developments or housing estates that may cause an oversupply of rental properties in the future. Tenants generally prefer to rent new properties. If you buy an older property in an area affected by new developments or an oversupply, you may have to drop your rent significantly to secure a tenancy.
10. Buy a low-maintenance investment property
Look at the long-term requirements for maintenance and how old the property is. A low-maintenance property will save you money and ensure a happy relationship with the tenants.