Choosing the right investment property isn’t the same as choosing your home. It calls for a different approach and it pays to be strategic and think about what kind of property will appeal to a wide range of tenants.
Here are our top tips for finding the right investment property:
1. Know your investment strategy
Before you buy an investment property it’s a good idea to have your investment strategy in place. For example:
• Are you trying to make a quick profit by buying the property to renovate and sell shortly after?
• Do you want to hold onto it for the long-term to try and take advantage of capital growth?
• Are you looking to improve your cash flow?
2. Location, location, location
An ideal location for an investment property is one with good transport, public amenities like schools and hospitals and is close to lifestyle features like shops, restaurants and parks. It is also good to think about areas that have the potential for above average growth in the future, for example through upcoming redevelopment and transport infrastructure improvement. As part of your research don’t forget to look at vacancy rates, sales prices, rent returns and projected population growth.
3. Pick the right type of property
Historically, houses have better capital growth and apartments have a better rental yield. Changing demographics is tipping the demand towards apartments in many areas. Generally, two or three-storey walk-up apartment blocks have lower overheads (eg strata fees) and better capital growth than high-rise apartments, unless the high rise has great views or some other highly desirable feature. There are a number of variables in picking the right investment property, so it pays to do your research.
4. Know your target tenants
Your choice of tenant should influence the type of property you buy and where you buy it. For example, young, professional singles will probably look for a stylish apartment or terrace in a security building close to transport, cafes and shopping precincts. On the other hand, a young professional couple with children will want to be near parks and good schools.
5. Use your head, not your heart
As an investor it’s good to find a property that will suit a broad range of tenants. This can be very different from buying a property that you would want to live in. There are certain features that appeal to most tenants regardless of the type of investment property:
• Security of the property and the area
• Tenant appeal
• A low maintenance property