How to make the right choice when buying an investment property

DO YOUR SUMS: Before you invest, do your homework to find a suitable investment property likely to deliver greater returns in the future, not only in the capital growth but also in rental returns. Photo - Shutterstock.
DO YOUR SUMS: Before you invest, do your homework to find a suitable investment property likely to deliver greater returns in the future, not only in the capital growth but also in rental returns. Photo - Shutterstock.

Buying a forever home can be an emotional decision; you could fall in love with the picket white fence or imagine raising a family in the home. But when it comes to buying an investment property, it's essential to keep your emotions in check and make the most rational decision possible.

Firstly, you need to decide what your end goal is and how much time you are willing to put in to achieve it.

For example, buying an investment property that needs renovation takes time, skill and energy, and not everyone has those in abundance.

Do you intend to manage the property yourself, or will you need a property manager? Where you decide to buy will be a significant factor in that decision. If you are one of the growing numbers of rentvestors, who buy to rent outside of the area you live in, then choosing a property that is easy to maintain from a distance will be necessary.

"Every investor or buyer should have a specific strategy in place that is unique to their goals. Common goals include wanting to retire, putting children through private school tuition or wanting to go on more holidays," buyer's agent Lloyd Edge said.

The right price

Choosing the right property at the right price is also key to success.

The most important thing to do before you make your purchase is to do your research. There are some great resources available:

On realestateview.com.au there is a price estimator, where you can search on any property address to find out the value. You can also check out what has sold in the area that you intend to buy.

CoreLogic offers reports giving insight into where is the best place to buy a property, the best suburbs to invest in, and where you can buy property for below $500,000.

The most important thing to do before you make your purchase is to do your research.

They also provide a free report giving insight into which suburbs thrived in 2020 and what we can expect from 2021. CoreLogic's Best of the Best Report for 2020 highlights Australia's best and worst-performing suburbs based on sales, rents and property values, as well as providing a 2020 market review.

You can download it at corelogic.com.au/best-of-the-best-2020.

There are real estate institutes across each state of Australia which act as the industry body in that specific state. The institutes, amongst other things, publish market commentary as well as median prices and other market data.

The right location

Choosing the right area to buy is also an essential factor. If you want to achieve capital growth where your property's value will grow over time, choosing a location that's on the up will help.

"If you're looking for an investment, make sure you buy in an area where there is scarcity," said Lloyd Edge, noting COVID-19 has produced an apartment oversupply in city areas at the moment.

"Tenants are looking to outer suburbs and regional areas right now, as they are looking for a home office or backyard due to working from home policies.

"Whereas, if you'd like to live in a city suburb, you might be able to snap up an affordable property right now."

According to realestateview.com.au the right location is integral to acquiring a suitable investment property.

If you choose the right location, the chance of gaining higher returns from your investment is far greater than if the area is not desirable and suitable for those looking to live close to amenities. Consider that proximity to certain amenities increases the desirability and value of a property; these include:

  • Schools
  • Public transportation
  • Public facilities (post office, libraries, parks, medical centres, etc.)
  • Shops and markets
  • Lifestyle activities (restaurants, caf├ęs, beach)

Therefore, it is important to consider proximity to these when buying your investment property.

When selecting an area to purchase a property in, try to avoid those likely to be dependent on a sole industry, i.e. manufacturing. Although it can be beneficial when the industry is doing well, your property's value may decline if it falls.

Some of the best places to buy are those experiencing population growth. As the population grows, infrastructure improves and the desirability of an area increases.

Living within proximity to a major city (i.e. 10 kilometres) is always highly sought after. Whilst many of these suburbs attract higher prices, look for emerging suburbs that may have strong growth potential.

The right home

Finding a home that will be desirable to potential renters will ensure its continuous demand.

Look for a home in good repair, decorated in neutral tones and has a flexible floorplan. A house that is ready to rent out immediately will help your cash flow.

A good rule of thumb is to ask yourself, "Would I be happy living here myself?"

If the answer is yes, you might be on to a winner.

For more information about investing visit realestateview.com.au