Investing in property is a smart way to accumulate your wealth. However, there are a number of things you must do before making any financial commitment to carefully evaluate the risks. Below is a checklist of 'must haves' when choosing a property to invest your hard-earned cash into.
While the fact remains that a good location is necessary for long-term value, the basic layout and features of the property need to be thoroughly assessed. Will it appeal to the greatest number of potential buyers and tenants across different demographics? Does it offer ample space for a backyard or an extra storage room? A functional home that incorporates all the basic amenities in the right suburb will attract quality buyers and tenants alike. Accessibility to supermarkets, schools, shops and within walking distance to public transport all improve the liveability of an area.
2. Tenant Appeal
If you are a first-time property investor, speak to a property investment consultant for advice to help maximise your capital growth and rental yields. Identifying the right property and understanding your target market is crucial. You need to ensure the type of residential properties you purchased will appeal to renters within the area. Knowing your target market helps to determine the key features of a property that is in line with their expectations and requirements. A consistent, steady vacancy rate is the best way to gauge a strong return. If the property is always in great demand, you can lease the property sooner at a premium rate.
3. Value-adding Potential
Buying or selling properties can be costly. A property that allows room for expansion or renovation is more attractive on a long term basis. This is because it allows buyers to modify the property to suit specific needs. The ability to build an additional bedroom, for instance, could add value to your property. Paying close attention to the development in the area, in the form of zoning, is crucial as it could potentially affect the value of your property. You need to find out the land use of the surrounding areas too. If there are any developments that could potentially restrict daily activities and liveability, the property might not be able to fetch a decent rental yield or resale value.
If the demand for properties in the suburb is greater than the supply, you can expect a satisfactory return on capital. The investment property type and the surrounding area are two things you need to consider. For properties that are in large demand in terms of both renters and buyers, but limited in supply in the market, the value of the property and rental rate will go up over time.
5. Build Quality
Ensure a high standard of workmanship for the development of your property to reduce maintenance and repair costs in the long run. If you want to attract quality tenants or buyers, it is worth getting a comprehensive building and pest inspection to avoid potential issues such as leaks, pest infestations (like termites) and decay. A high-quality property that is well-kept will continue to remain in demand and bring in a high rate of return.
If you follow these five rules when looking for an investment property, you’ll certainly lower your risk of buying a lemon. Doing your homework allows you to be well informed and comfortable in the knowledge that you are purchasing an investment that will generate strong returns into the future. Yes, you'll be well on your way to becoming a successful property investor
Already purchased your investment property? The next thing you need to consider are all the ways to prepare your property for rent.
Published on 29th of April 2020 by Marty Stanowich