Purchasing a property for investment purposes can involve a different set of considerations compared to purchasing a home to live in. Here are some tips to get you started.
Which rental market?
First, decide if your property will cater for the budget rental market, mid-level rentals or the executive market. While the “executive” end of the rental market provides very good returns, it may not be suitable for the average investor. The market for high-rent properties is more fickle and hence you could find yourself without a tenant for a considerable period and no cash flow to meet mortgage repayments. At the budget end you are more likely to encounter higher tenant turnover.
What type of tenant?
Consider the type of tenant you intend to target. Are you looking for young couples with no children or will you focus on the family market? Units are good for business couples, while the typical house and garden is more suitable for families.
To minimise tenancy turnover and appeal to the higher calibre tenant, the property should be finished and presented to a standard that is more applicable to an owner-occupier. A relatively new or recently
refurbished property, well decorated, with good quality fixtures and fittings is important to secure the right tenant who will stay for the longer term. Skimp on quality and you may end up paying more on regular maintenance and replacements.
Location, location, location
Once you have determined the type of property, the next step is location. A more attractive rental property will be close to public transport and good road systems. If your rental is family-focused you need to be sure it is close to schools, childcare facilities
and sporting amenities.
Consider if there are places of employment in the close vicinity, such as industrial or commercial centres, attracting substantial numbers of employees – and potential tenants. What is the level of rental vacancies in the selected district?
For long-term capital growth seek an area with high trends in population growth. Take time to study which areas are proving popular and where local authorities are developing infrastructure.
Do it yourself or use an agent?
Happy, contented tenants will look after your property, so good property management is essential. If you intend to do this yourself, be sure you are contactable 24/7 in the event of emergencies and have a list of tradespeople you can call for plumbing, electrical or building repairs. If you intend to use a property agent, check their background, experience and current management procedures. And shop around.
Remember, to improve your chances of profit, property should be considered a long term
investment. With this in mind, it is worth putting in the extra legwork before you buy to help make a good investment decision.
General Advice Disclaimer
This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or WealthSure Financial Services Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.