5 rules for buying great investment properties in Perth
Now is a great time to buy an investment property in Perth with prices at very affordable levels and signs that the state economy is improving.
For example, the latest unemployment figures for February 2017 show that the unemployment rate in Western Australia tumbled to 6 per cent which is virtually the same as the national unemployment rate.
When buying an investment property in Perth, first time investors should consider the following points:
1. Infrastructure
New infrastructure can play an important role in driving future capital growth of an area. For example, property investors should look at new capital expenditure planned by the new Labor state government in Western Australia including the proposed $45 million Perth Academic College in the City Link development. Educational facilities are a key attraction for families and this development should therefore have a positive impact on surrounding property values.
2. Research
It is important to spend time researching all aspects of a property market before even looking for an investment property. Issues, such as negative or positive gearing, rental returns and depreciation are key matters that have to be considered by a first-time property investor. Past trends in property values are also a good indication of future trends and therefore it is wise to examine the long-term capital growth rates of the suburb. REIWA can provide property values trends for most Perth suburbs for the last 10 years at least.
3. Wide approach
Take a broad approach to buying an investment property. Most first time property investors buy a property in their local neighbourhood because they are familiar with the area. By taking a narrow approach to the location of the investment property, first time investors therefore severely limit their options. For example, many first-time property investors who live in the outer suburbs of Perth tend to overlook excellent buying opportunities in the inner-city area where property prices are now highly affordable.
4. Stay focused
When you have selected a suburb, don’t make an emotional decision when choosing a specific home. Most first time investors purchase a property they would like to live in. It is important to remember that the investment property must appeal to a tenant who will be paying the rent. That is why it is important to determine if the style of home you plan to buy will appeal to renters.
Most renters tend to be younger people who prefer to live in areas close to the city in low maintenance properties such as apartments and town houses. Rental income is a key factor in serving the loan so if you cannot find a tenant then you will have problems keeping the investment property over the longer term.
5. Use a property manager
One of the biggest mistakes first time property investors make is to try and manage the property themselves.
This is the number one reason why many first time investors never go on to buy a second investment property because they select a poor-quality tenant without undertaking the necessary background checks. Selecting a poor-quality tenant can result in thousands of dollars of lost income and damage to the property. This is a big financial setback that many first time investors cannot recover from.
A property manager will be able to achieve in most cases a higher rental price as they are trained to negotiate and are familiar with the market. They also have access to systems that others outside the industry cannot access which enables them to reach a much larger audience for your advertised property ensuring that it is rented quickly.
