October 09, 2013
When looking for an investment property, your key focus should be maximum capital growth. With this in mind, here are some tips that are important in your investment property search.
• Close to the CBD (usually 2-12 kms) - This is where the majority of quality tenants want to live. Employment opportunites are a big factor. When demand is high for a certain suburb and area, rent prices tend to increase. With this in mind, buy in quality suburbs close to capital cities.
• Close to public transport - Many people want to live close to the CBD because they want to access it easily, either for work or other lifestyle reasons. Parking, in most Australian cities, is expensive and often hard to find. Your target property should be within a 10–12-minute walk of public transport. However, no one wants to be living on top of it, such as across the street from a train station. Target properties within reach of public transport but not right next to it.
• Close to lifestyle amenities (within a 10 minute walk) - One of the first things people look at when renting an investment property is their potential amenities. How close are the shops, restaurants, coffee shops? You need to understand this is a key element to tick off.
• How scarce is the property? - The simple word "scarcity" is the one word people should keep in mind to simplify the criteria when buying an investment property. It’s the reason you should never really buy an apartment in a block of more than 12. When you look at a lot of the high rise apartment blocks around the country, (100 properties plus) the growth is not very strong, as there always seems to be several for sale at the same time. When multiple properties are for sale in the one block at the same time, demand is less, due to an oversupply. Where there are multiple options to buy similar properties in one block, the price demanded can't be as strong. It’s why the Gold Coast has suffered for so long. Remember, supply and demand determine price. Understand the true economics behind this, and you will fare better than the average investor.
• Avoid off the plan - Generally off-the-plan properties are multiple properties of the same or similar nature. When they all hit the market at the same time, it’s hard to negotiate the best rent due to more than one same property being marketed at once. Off the plan properties in a large development lack scarcity.
• Don’t be fooled by ‘rental return guarantees’ - Sometimes these are too time-limited or mean that the developer over-compensates by inflating the sale price. Confirm the rental returns they are promising by checking with a local independent real estate agent.
• Research what’s happening in the area - Is the street going to be overrun with units or low-rise apartment blocks in three years' time? Is a shopping centre due to go up across the road? Your local council’s town planning department can help assist you with these details.
• Balance the three P’s - (Price, Property & Position) - The three P’s will always be a compromise. If you are focused on price alone (getting a property as cheaply as possible), you will most likely have to compromise on the quality of the property itself or its position (the other two P’s). If position is your number one consideration, you will most probably have to pay a premium price.
• You are not buying for yourself - One of the most important rules when you begin a search for an investment property is to remember that you are not buying for yourself. You are not looking for something that would suit you or your lifestyle necessarily. You are looking for a property that will suit the needs of your target renter and will double in value in the shortest time possible.