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Investing in property can be a fantastic means of strengthening your financial position and generating wealth. However, when undertaken without the proper research, knowledge, and general understanding of the property market - the fallout can be disastrous. Thus, we have compiled a list of 5 simple tips, designed to steer you in the direction of the perfect investment property.
1. Desirable location 🌏
Location, location, location! As we have been told by countless property shows for years on end, location is everything. When you are purchasing your investment property, you need to ensure it is in a place where people actually want to live. Even though you may adore the peace and solitude of the country side, those in the rental market may not. And its not just the general positioning that matters, you should also take a look at a house's surrounds; are there schools? Shops? Transport options? These are the kinds of things that potential tenants will look for, and the lack of any one of these facilities could polarise a large portion of your target group.
2. Capital growth ⬆️
Question: What is the ultimate goal when investing in property? If you answered anything other than 'to make money', then perhaps you should go back to the drawing board and rethink your property investment strategy. When searching for an investment property, capital growth should be at the forefront of your mind. Even if cash flow is your short term goal, capital growth is still the best way to build equity fast, and generate more income in the long term. If there is an enormous supply, and little demand (such as a new crop of inner city apartments) then it may be a very long time before you witness any growth. Research historical property data, and suss out median prices in the area. It's also wise to consult a professional, to help you guesstimate the potential for growth - real estate agents can be a handy utility.
3. Cash flow 💸
As mentioned above, cash flow is another important consideration when buying an investment property. If you are cash-poor but asset-rich, you will likely need a positively geared property in order to service your monthly mortgage repayments. With the Australian property market experiencing record highs, positively geared properties can be harder to come by, but they certainly still exist. Look to high yielding suburbs; mining towns or areas with large student populations can be valuable places to consider. Indeed, there are certainly ways to transform negatively geared properties; instead of renting out the whole house, consider renting out individual rooms at a higher rate to generate a positive cash flow. This is an ideal scenario for student share accommodation!
4. Low maintenance 🔨
It's effort enough completing all the niggly little weekend jobs on your own home, let alone on any additional investment properties you may have. To avoid excessive weeding, painting, and pest controlling, source a low maintenance property. How do you find one, you ask? Well, it's a matter of weeding out the 'dud' investments - so to speak. Avoid extremely old properties that would require intense upkeep, avoid swimming pools (more burden than benefit), define gardening responsibilities in the tenancy agreement, and, simply, consider the required maintenance on each property you look at. Identifying potential grievances before you buy could save you thousands in maintenance costs in the long run.
5. Normality 🏡
"Wow, look at that amazing leopard print splash back!"
"Check out these cool banana yellow bathroom wall tiles!"
"I've always wanted a cowhide built-in bedhead!"
While these may be the exclamations you make, as you walk into what could only be described as a confused hoarder's take on eclecticism, few others will feel the same. Bold, offensive palettes can be alienating, as they ignite feelings of either love or hate, and don't leave much room for the middle ground. While these quirky touches may be perfect for your own home, it's best stick to the 'norm' for rental properties. Neutral tones, soft palettes, and understated textures will appeal to the masses, and give tenants the opportunity to add their own personal styling touches. So, if you're choosing from a pair of almost identical units, and can't decide between the charcoal exterior or the blood orange - please, for Pete's sake, go for the charcoal. You (and your future tenants) will thank us later.
There are many different ingredients needed to concoct the ultimate investment property. While it will prove difficult to find a property that harmoniously coordinates all of the above, these are all certainly things you should consider before placing a winning bid. Decide on your priorities, and compromise when needed. Remember, you have a myriad of specialists at your disposal; your mortgage broker, real estate agent and financial planner will all be happy to impart their wisdom, and guide you towards the perfect property. Good luck, and happy house hunting!