If you are considering the purchase of an investment property, then its time to get critical. Firstly, analyse what you like and dislike, then scrutinise property so that it matches these needs. This process will enable you to buy a dwelling that gives your tenant good value for their money, and adds worth to your portfolio.
To do this, follow these ten steps:
Must Do # 1
Research the Market
Find out what types of property are in demand in which areas. You can gather this information by talking to property managers, looking at rental adverts and by contacting buyers agents. You can also use the internet, and review CoreLogic and other real estate data. Then make yourself a short list of property types and their locations.
Must Do # 2
Look Beyond Rental Returns
Sure you want a high rental yield on your investment property, but sometimes capital growth can be just as important. Always compare both rental yield and capital growth for an area before you buy. You can do this by jumping online and visiting real estate websites. Most will list sales and rental data so you can see property leasing and selling values.
To calculate capital growth and rental yield, find online calculators. The results will give you a good indication of your expected investment returns.
Must Do # 3
Buy Near Public Transport
As an investor, you need to think like a tenant. Not all tenants will have cars, and some just like the convenience of using public transport. So by purchasing a property near buses, trains or trams your tenant can travel quickly, which makes your property desirable.
Must Do # 4
Buy Near the Median Value
If you are looking to buy a dwelling in a particular area and the median is $300,000, then buy as close to this as possible. Do not stretch your budget to purchase a property that is more expensive, as it is unlikely that you will fetch more in rent or realise a higher capital gain.
Must Do # 5
Research the Developer and Builder
If you are buying a new build, then find out more about the developer and the builder of the dwelling before you buy. You want to know how many other developments they have completed or homes they have built, if these were successful, and what returns the property fetched. If you need to, door-knock and ask people living in the homes and area what they think. This information will give you a good indication of quality.
Must Do # 6
Seek Out Smaller Developments
If you are buying an existing property, then consider the size of the development. Many small properties squeezed together, which all look the same, tend to have less appeal. But, by purchasing in a minor development that has more space and overlooks a park, you may reduce your vacancy rate.
Must Do # 7
Look at Your Tenant Sources
Before you buy an investment property, consider where youll find your tenants. Review advertising sources, and explore your local surroundings. Property located next to employment hubs and universities is ideal.
Must Do # 8
Consider Inner City Locations
Property situated in the inner city is easier to rent, due to the population density being higher in these areas. So, if you can afford to buy in the CBD, then make sure you review your options. Otherwise, you may be passing up an opportunity.
Must Do # 9
Do not Focus on Cheap Strata Fees
Rather than just looking at the strata costs of property, consider the benefits. Often a property with higher strata fees offers more features than one that has lower costs. These added features may give you a higher rental yield, capital gain and a reduced vacancy rate.
Must Do # 10
Do not Become Emotionally Connected
Always think of your investment property as an asset. Do not consider it as your home. Otherwise, it will be difficult for you to lease the property and make a good return on your investment.