10 steps to finding the perfect investment property
When looking for an investment property, your key focus should be maximum capital growth. Here are some ways to find properties primed for price growth.
Blogger: Stephen Zamykal, founder, Australian Property Club
When looking for an investment property, your key focus should be maximum capital growth. Here are some tips to help you with your search.
Close to the CBD (usually two to 12 kilometres)
This is where a majority of quality tenants want to live. Employment opportunities are a big factor. When demand is high for a certain suburb and area, rent prices tend to increase. Buy in quality suburbs close to capital cities.
Close to public transport
Many people want to live close to the CBD because they want to access it easily. Parking in most Australian cities is expensive and often hard to find. Your target property should be within a 10- to 12-minute walk of public transport. However, no one wants to be living on top of it, so you should target properties within reach of public transport, not right next to it.
Close to lifestyle amenities (within a 10-minute walk)
How close are the shops, restaurants and cafés?
How ‘scarce’ is the property?
‘Scarcity’ is the one word people should keep in mind to simplify the criteria when buying an investment property. It’s the reason you should never really buy an apartment in a block of more than 12. When multiple properties are for sale in the one block at the same time, there is less demand due to an oversupply. Supply and demand determine price.
Avoid off-the-plan
Generally, off-theplan properties are multiple properties of the same or similar nature. When they all hit the market at the same time, it’s hard to negotiate the best rent due to multiple similar properties being marketed at once. Off-the-plan properties in a large development lack ‘scarcity’.
Don’t be fooled by ‘rental return guarantees’
Sometimes these are too time-limited or mean the developer overcompensates by inflating the sale price. Confirm the rental returns they are promising by checking with a local independent real estate agent.
Research what’s happening in the area
Is the street going to be overrun with low-rise apartment blocks in three years’ time? Is a shopping centre due to go up across the road? Your council’s town planning department will have the details.
Balance the three Ps – price, property, position
The three Ps will always involve compromise. If you are focused on price alone, you will likely have to compromise on the quality of the property or its position.
You are not buying for yourself
One of the most important rules when you begin to search for an investment property is to remember you are not buying for yourself. You are looking for a property that will suit the needs of your target tenant and will double in value in the shortest time.
Ensure your loans are well structured
Too often, I sit in front of people whose loans are costing them money. Two rules we live by on this front are: All your loans must be interest-only (never principal and interest), and do not ever cross secure your properties with one lender.
Read more:
7 things you may not know about wealth creation
How to maintain an ageing investment property
The negotiation tactics that can ruin a deal
How much does it cost to hold an investment property?
