Finding the right property a challenge for investors

Finding the right property is the biggest challenge facing property investors today, new research has revealed.

According to Mortgage Choice’s 2014 First Time Investor Survey, 50.6% of investors who purchased their first investment property within the last two years said finding the right property was the hardest part of investing. The results were surprising, especially given the current market conditions.

With property values climbing considerably over the last 12 months, we expected to see more first time investors saying their biggest challenge was saving a deposit. Instead, just 15.3% said saving a deposit was the biggest challenge they faced when investing in property, while a further 15.5% said choosing the right investment strategy for their needs was the toughest aspect of property investment.

Looking at the data, it was clear that Australians are quite particular about what they want from their investment property. They know what they want and they won’t settle for anything less.

When purchasing an investment property, investors look for a dwelling that is not only located in the right suburb and is close to essential amenities, but also a property that is located in an area that has proven high tenant demand. For investors, it seems location is everything. A property that is located in a good suburb and near the necessary amenities including cafes, restaurants and local transport, is likely to attract more tenants, which can help to increase the rental income generated by the property.

Investors are a savvy bunch - they have done their due diligence and investigated not only what locations are attractive to potential tenants, but what types of properties are in hot demand. More than 60% of recent investors admitted to purchasing either a small house (1 to 3 bedrooms) or a small unit (1 or 2 bedrooms) because they know these types of properties are in the highest demand.

Just 23% of investors admitted to buying either a large house (4 or more bedrooms) or a large unit (3 or more bedrooms) as an investment property. Today’s first time investors are switched on. They know what their potential tenants are looking for in a property and they aren’t prepared to buy something that doesn’t meet these requirements. Despite the fact that the property market is running hot at the moment and there is a lot of competition out there from other buyers, it seems first time investors are happy to bide their time and wait until they find the perfect property.

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Table 1: Greatest challenge 

What is your greatest challenge as an   investor?

National

NSW

VIC

QLD

SA

WA

Saving a deposit

15.3%

14.6%

17.1%

7.8%

26.5%

14.1%

Choosing the investment strategy (eg. Negatively or positive   geared, to renovate and sell or hold for potential capital gain, etc.)

15.5%

16.8%

9.3%

18.6%

11.8%

19.7%

Finding the right investment property

50.6%

53.3%

57.4%

52.0%

38.2%

43.7%

Choosing the right property loan (ie. interest only versus   principal and interest, fixed versus variable, etc.)

7.3%

6.6%

7.0%

8.8%

7.4%

8.5%

Getting the finance approved (i.e. due to credit history, being   self employed, etc.)

5.6%

5.1%

3.1%

4.9%

10.3%

8.5%

Sourcing quality financial advice

5.7%

3.6%

6.2%

7.8%

5.9%

5.6%

 

Table 2: Top factors they look for 

What are the top five factors you   look for in an investment property? (multi answer question)

National

NSW

VIC

QLD

SA

WA

Ability to renovate to add value

30.7%

33.6%

27.1%

32.4%

44.1%

21.1%

In the right suburb and street

71.6%

68.6%

74.4%

73.5%

79.4%

66.2%

Tenant demand in that area

73.8%

75.9%

76.7%

73.5%

61.8%

77.5%

Suitability of the property to my desired tenants

29.3%

30.7%

28.7%

23.5%

30.9%

31.0%

Population growth in that area

47.5%

51.1%

41.9%

52.9%

35.3%

53.5%

Infrastructure going into that area

55.6%

59.1%

51.9%

55.9%

55.9%

62.0%

Locality to amenities and entertainment (cafes, restaurants,   etc)

59.0%

52.6%

62.0%

63.7%

58.8%

57.7%

Size of rooms and how functional the layout is

37.4%

27.7%

41.9%

36.3%

42.6%

38.0%

How easy it is to access (eg. elevator, stairs, angle of   driveway)

8.6%

10.9%

5.4%

6.9%

14.7%

2.8%

How many car parking spaces    are available, if any

12.6%

13.1%

18.6%

9.8%

7.4%

9.9%

If it needs any repairs, renovations or regular maintenance

39.8%

40.1%

39.5%

36.3%

33.8%

47.9%

If the location is accessible for me to make regular inspections

9.2%

8.8%

10.9%

6.9%

8.8%

11.3%

Aspect (not looking onto neighbours properties, views, window   placements, etc)

13.0%

15.3%

7.8%

17.6%

14.7%

9.9%

Level of noise

9.0%

9.5%

11.6%

7.8%

7.4%

7.0%

Other

2.9%

2.9%

1.6%

2.9%

4.4%

4.2%

Table 3: Property type

What type of investment property did   you purchase?

National

NSW

VIC

QLD

SA

WA

Small house – 1 to 3 bedrooms

38.7%

35.0%

45.7%

35.3%

50.0%

29.6%

Large house – 4 or more bedrooms

18.0%

13.1%

11.6%

25.5%

19.1%

29.6%

Small unit/apartment – 1 or 2 bedrooms

25.3%

33.6%

28.7%

17.6%

16.2%

15.5%

Large unit/apartment – 3 or more bedrooms

5.0%

5.8%

2.3%

5.9%

4.4%

7.0%

Block of units/apartments

1.9%

0.7%

3.1%

2.9%

0.0%

2.8%

Small townhouse/terrace – 1 or 2 bedrooms

2.3%

2.2%

2.3%

1.0%

1.5%

5.6%

Large townhouse/terrace – 3 or more bedrooms

5.2%

6.6%

4.7%

6.9%

2.9%

4.2%

Duplex

0.6%

0.0%

0.0%

1.0%

1.5%

1.4%

 

About the Survey

Market research company Nine Rewards was commissioned by Mortgage Choice to conduct the 2014 First Time Property Investors Survey. The online Survey was conducted in late May 2014 and completed by 1,047 Australians who were planning to purchase their first investment property in the next two years or recently purchased their first investment property.

 

Important information

 

This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.

Posted in: Property investment

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