October 29, 2017
Are you thinking of buying your first home or investment property? If so, congratulations! This is easily one of the most important decisions you’ll ever make.
It’ll come as no surprise that location is everything when choosing your property. There are a number of factors you should consider before making your decision.
First of all, determine whether the home you’re buying is to live in, or to rent out. After all, the requirements you and your family have may not be necessarily the same for tenants. If you’re buying a property to invest in, you’ll need to consider rental income, rental yields, vacancy rates and capital growth.
Rental incomes will vary between properties and may depend on a variety of factors such as: where you choose to buy; the size of the property; the property’s amenities; its proximity to schools, parks, entertainment.
Rental yields and vacancy are important metrics. Rental yield measures the income generated by your property as a percentage of the value of the dwelling. While rental yield is a valuable metric, it’s important that investors do not overlook all other costs associated with property ownership. You should factor in strata fees (if applicable), maintenance costs, property management fees and any other costs you incur as a result of owning and renting out the dwelling.
Furthermore, vacancy rates indicate whether a particular area is in demand or not. A low vacancy rate is ideal as it means you’ll have your pick of tenants. On the other hand, a high vacancy rate indicates a large number of vacant properties, suggesting it may be difficult to find tenants.
Capital growth is an important goal for most investors but it will not happen overnight. Most properties will increase in price over time. All good things take time. If you’re going to invest in property, do so knowing that it is a long-term commitment and requires patience.
You should look at sales data. Many websites offer property sales reports, either for free or for purchase. These property reports can show suburb price growth using monthly, yearly and even 10-year comparisons. Take time to review and analyse the data and it will assist you in identifying the market condition.
Whether you’re going to live in the property or rent it out, infrastructure is undeniably one of the most important factors when choosing where to buy your first, or next home. Developments could result in significant capital growth. Infrastructure projects include transport, schooling, hospitals and of course utilities. A large infrastructure project could revolutionise an area and bring with it an influx of jobs, an increase in population and ultimately, stimulate the economy. Government funded projects like the construction of highways or airports should be accounted for when you make your decision. While these projects will drive tenant demand in the area, they could also have a negative impact for property owners. It’s sometimes necessary for governments to buy parcels of land in order to undertake these projects and this could include land on which your property is located.
If you need help choosing the right property, speak to your local Mortgage Choice broker. They can give you some more tips on what to look for when you’re searching for the right property.