When it comes to choosing a property as an investor, there are several crucial factors to take into account. Whether you aim to generate rental yield or future gains, making dispassionate decisions based on the best returns is essential. In this informative article, we will explore six key things to look for in an investment property to help you make a successful investment.
1. Capital Growth
Capital growth is a critical factor to consider when evaluating an investment property’s potential. Assess the growth-trend indicators for the property, such as the median sale price for the suburb and its historical increase over the past few years. Utilize property market research tools to gain insights into capital growth trends in your desired areas. This information will enable you to make informed decisions about the property’s long-term financial gains.
2. Rental Demand and Yield
For investors seeking rental income, researching areas with strong rental demand and yield is paramount. Rental yield is a calculation of the property’s profitability, taking into account the expected rental income versus the costs of ownership and maintenance. Analyze the performance history of similar properties, vacancy rates, median weekly rent, and growth rates to assess the financial viability of your investment. Understanding both gross and net rental yield will give you a comprehensive picture of your potential returns.
3. Location
The age-old real estate adage, “location, location, location,” holds true for investment properties as well. Consider your potential tenants and their needs when choosing the property’s location. Proximity to public transport, schools, shops, restaurants, and other amenities will make the property more appealing to potential tenants. Additionally, look into the neighborhood’s safety and development prospects, as these factors can influence the property’s growth potential.
4. Type of Property
Choosing between a house or a unit largely depends on your budget and the location’s demographics. A house with a backyard may attract more tenants in family-friendly suburbs, while modern apartments could be in high demand near universities. Understanding the preferences of your target tenants will help you make the right decision. Keep in mind that houses generally have higher capital growth and rental potential, while units may offer lower entry costs and require less maintenance.
5. Age of the Property
The age of the property is a crucial factor that can impact ongoing maintenance costs. Older properties may require more upkeep, so thorough inspections by professionals are vital before making a purchase. Renovating a property with minor fix-ups may be a viable option, but major renovations could affect its profitability. Additionally, consider the property’s depreciation schedule, as it may impact your tax deductions.
6. Property Features
Even though you won’t be living in the property, consider the features that potential tenants will find appealing. Features like a garage, additional bathrooms, or a home office space can increase the property’s rental value. The layout and design of the property, as well as its natural light, are also essential considerations for tenants. Ensuring that the property is designed with practical everyday living in mind will make it more attractive to potential renters.
Conclusion
By evaluating these six key factors in a holistic manner, you can confidently choose the ideal investment property that aligns with your financial goals. Proper research and careful consideration will enable you to make an informed investment decision. When you’re ready to take the next step as an investor, explore our current investor home loan rates and speak to your dedicated Home Finance Manager. Investing in property can be a rewarding venture, and we are here to support you throughout the process.