Leaving decision-making to your “gut feeling” can work in many realms of life, but when it comes to buying investment property, those with a proven strategy are more likely to succeed consistently.
If you are actively in the market for an investment property, you will be met with numerous “opportunities”, but only a few are likely to deliver the growth or return you are seeking.
Successful property investors filter opportunities through a set of predetermined criteria, dividing the suitable from the unsuitable.
While there is no foolproof system, investment property success stories are a product of research and careful consideration rather than chance.
Let’s start with the assumption that you are buying a new or near new property which requires little or no maintenance, and have researched and identified a region or town where you want to buy.
When looking at a specific property, what’s the type of criteria you may use to rule a property in or out of your consideration set? Here’s a quick summary:
Location, location, location. It’s the absolute non-negotiable of buying real estate. Location can refer to what is close by in a positive sense, for example waterfront, shopping and public transport. Location can also refer to what is close by in a negative sense.
Design - When assessing the design of a potential investment property favour functionality and practicality first and foremost. What are the important factors in home design that will encourage long term tenants?
Value for money - Relying on capital growth alone to increase the value of an investment property can be hit and miss. It’s obvious, but the sure-fire method to make money on investment property is to buy well.
Rent-ability - Consider the typical person who is likely to seek a rental property in your property’s location. Whether you are buying in a suburb known for its families, its working class, its prestige, or a high number of students, you should seek the type of property that matches the needs of a likely tenant.
Marketability - Ideally, your investment property should remain attractive to the market no matter what the economy is doing. For example, a property in the top 5% price bracket may struggle to attract tenants if the economy slows. Favour properties that will be tenanted no matter what the economy is doing.
Market timing - At any one time in Australia, there will be individual markets going up, going down, and going nowhere. By investing counter-cyclically, for example, buying when others are selling is more likely to lead to a value-for-money deal.
Appeal - In a crowded market place, look for a property that has an X-Factor – something that will set it apart from other similar properties in the same area. This could be anything – from a stylish Balinese hut in the backyard, a fireplace or easy access to a local park.
Some of these factors are easily discovered. Others take serious investigation and due diligence, but the time you take to establish a thorough understanding of the property to inform your decision making will be well worth it.
Harcourts South Coast is the largest and best resourced agency on the Fleurieu. We have a range of properties to match a variety of lifestyle and investment needs and would be happy to help you take advantage of the market conditions throughout the year.