Are you thinking about investing in a property?
Property investment can be a great way to secure your financial future, but it’s not as simple as just buying a house or apartment and waiting for the money to roll in.
If you want to maximize your return on investment, there are a few things to consider.
In this Top Tips Tuesday, we’ll go over the top five things property investors should look for when buying a property for investment purposes.
1. Location
Location is critical when buying a property for investment purposes.
The location will depend on the type of property you want to purchase.
For example, if you’re considering an apartment, it needs to be close to the inner city, public transportation, and all the local amenities, dining, food, entertainment, and shopping centres.
If you’re considering a house, it should be close to highways and transportation, schools, and education, as it will likely be rented to a family.
Also, consider the population growth in the area. Buying in areas that are growing in population will help secure your long-term investment.
2. Rental Yield
Calculating the rental yield on a property is essential, particularly when interest rates are higher than usual.
It’s easy to calculate the gross rental yield. Take the annual rent and divide it by the purchase price. Then subtract the annual property expenses, rates, insurance, property management costs, etc.
If you’re looking for a unique cash flow positive property, consider the higher annual costs of short-term leasing, such as student accommodation.
3. Property Condition
The condition of a property is often overlooked when buying an investment property. Older properties can have high maintenance costs, which can blow out your cash flow.
It’s essential to get a modern, low maintenance property for investment purposes, even if it costs more upfront.
Remember, you’re looking for the maximum return on investment, so put your investor’s hat on and not your home buying hat.
4. Exit Strategy
Consider your exit strategy when buying a property. Think about the long term, the next 10 or 20 years, and who will buy the property when you sell your portfolio down at retirement.
Certain markets attract specific types of properties, so be aware of this when buying. Understanding this will help you when it comes time to sell, and you have a more extensive buying market.
5. Market Trends
Market trends are continually changing, so don’t think of what happened ten or twenty years ago.
Currently, we’re seeing a lot more single people looking for smaller, more affordable accommodations, such as a single room.
This demographic shift provides a target market for investors.
Present your property in the best condition to attain the maximum rental yield, and speak with a property manager to learn what tenants are looking for in terms of property condition and price point.
Investing in property is an excellent way to secure your financial future, but it’s essential to do your research and consider these top five things when buying a property for investment purposes.
Remember, property investment is a long-term strategy, so take your time, do your sums, and speak with experts, and you’ll be on your way to a successful investment portfolio.
If you are thinking of purchasing your next property and would like to have a discussion about your options, feel free to book a time in my calendar by clicking here.
Regards,
Geoff Tomkins
Buyers Advocate
PH: 0404 852 781
