Throughout the last 18 months, we’ve seen rental vacancies at an all time low. This in turn, has resulted in the drive for the purchasing of investment properties reaching an all time high. Investors are seeking out properties offering a good return on investment with the possibility of capital growth in the future.
While the pandemic may have created a unique opportunity for savvy investors, not all properties make good investments. Let’s take a look at some of the things that make a Grade-A investment property!
Location, Location, LOCATION!!
As always, location is almost everything when it comes to purchasing a property. Of course before you do anything, you need to establish a budget you’re setting for yourself. This budget will in turn generally reflect on your tenant target market, whether that be families, singles, couples, elderly etc.
Determining your target market is extremely important when deciding where to purchase your investment property. Let’s take families as an example. Location wise you want to look at a suburb where there’s several great primary and secondary schools within the area, as well as public transport routes nearby too. Wide open spaces such as parks or reserves, are an added bonus for the location.
As a general rule of thumb for all investment properties you want to look at the proximity to the CBD or the beach, as well as the lifestyle amenities nearby such as cafes, restaurants, retail shops and supermarkets. A neighbourhood’s safety and general vibe are both important factors when figuring out its growth potential.
Rental demand and Yield:
Investors generally plan on renting out their property to generate an income and cover costs. Once you decide on a couple of area’s you’d be interested in investing in, it’s vital you research the vacancy rates, average rental yield, and median weekly rent (and potential for growth), of similar properties in each suburb.
Rental yield is calculated by how profitable the property can be, based on the expected rental income, against the costs of owning and maintaining the property. For example, an investment property worth $500,000 with an expected rental income of $500 / week, gives you a gross yield of:
$26,000 ($500 x 52) / $500,000 = 0.052 x 100 = 5.2%
Age of the Property:
As investment properties typically involve ongoing expenses, you want to make sure that you don’t buy a property that will drain you financially. Older properties generally need more maintenance than new builds, depending on the condition they’re in. Having a professional building and pest inspection prior to committing to your contract of sale is vital.
Property Features:
Despite the fact that you won’t necessarily be living in the property, think about features that could encourage you to live there. For example, additional bathrooms, a separate office space, and secure garage parking, will go a long way in increasing the property’s rental value.
Smaller elements such as air-conditioning, a dishwasher, and a washing machine/dryer, can also increase the property’s desirability.
When purchased, if the property is presented in a way which reflects more on the previous owner’s personal taste, take a look at toning it down with the use of neutral colours to appeal to a wider audience.
Safety:
As a general rule of thumb, ensure the property is compliant with legislation prior to advertising.
If you’re looking for more information, our friendly team of Negotiator’s and Property Manager’s are here to help! Contact us here for any assistance.