How to Choose an Investment Property?
If you are in the market for an investment property we have some helpful tips to get you investing sooner. It’s important to understand your investment goals – are you wanting to invest for long-term wealth creation, a passive income, a retirement strategy, or a combination of these? There will be the right property for you – your strategy and goals will determine the location, suburb, type of property and price point you should be aiming for in your property hunt.
6 Tips for Choosing an Investment Property
To help you in taking the next step in your investment journey, Coronis Finance has complied a list of top tips for choosing an investment property.
1. Choose the best location to buy an investment property
Location is the most important factor when choosing an investment property. Land values tend to increase over time thanks to the limited amount of land available to use for dwellings. Unless governments or developers release new land, the existing land’s value continues to increase as our population increases, and contributes to demand and supply market factors. Importantly, this also applies to rental yield.
2. Find somewhere close to employment
Employment opportunities can affect how much people want to live in an area. People generally want to live close to where they work to minimise their commute-time, so rental properties close to employment hubs, like a central business district of a city or town or business area in suburbia are great investment choices.
The type of employment is also a key consideration for your investment property location. For example, major cities have a diverse range of employers, which is desirable to a wide range of people. High-paying industries are usually concentrated in cities and when people are earning a high income, they can afford higher rents. When there is competition for desirable homes, this pushes up values.
Research and timing is key if you are looking outside major cities for choosing an investment property. On one hand, if you buy in an area dominated by a single industry and the major employer shuts down, you risk your returns drying up, but if you invest at the same time as a major employer or industry gets going in a town, then an influx of people needing housing would drive up demand and prices, and give you better returns.
3. Ensure there are good transport connections
Good transport connections can help people overcome an issue of distance to employment. An area with well-established transport options into employment hubs are often desirable to renters. New infrastructure projects can also drive desirability of a suburb or area, especially if the new transport options are a drastic improvement to what was previously available.
4. Look for an “ideal” suburb
Searching for an ideal suburb as if you were a home-owner or renter’s point of view will help you find the right investment property. For the best chance at a strong growth, look for a property that will appear to a wide range of home-owner types, particularly families and couples.
Here is our mini guide of features to look for, and features to avoid, in your investment property search.
Features to look for in an ideal suburb:
- Proximity to a wide range of employment
- Good transport connections
- Good school catchment
- Parks, recreation facilities, beaches and outdoor spaces
- Shops and services such as medical centres and daycare
- Cafes and restaurants
Features to avoid when looking for an ideal suburb:
- Poor transport connections
- Industrial areas
- Flight paths
- Traffic congestion
- Unsafe areas with high crime rates
5. Look for an “ideal” investment property
Your ideal investment property will be unique to your financial budget and investment strategy goals. General tips for an ideal investment property include:
- Number of bedrooms suited to the renter demographic
- Broad appeal
- Minimal maintenance
- Parking space
- Ample outdoor space
- Second bathroom or ensuite
- Quiet residential street
On the flipside, there are general features to avoid for an investment property:
- Main road location
- Nearby high-voltage power lines and phone towers
- Windows and outdoor areas overlooked by neighbouring buildings
- Bad floor plans that cannot be modified easily
- No natural light
6. Choose the best type of property for your budget and investment goals
Buying a house as investment property
Tend to experience stronger capital growth
Can have greater development potential
As a home-owner, you are responsible for every aspect of the building including paint, carpet, roof and essential services like hot water.
Apartment as investment property
- Generally cheaper to purchase
- Often concentrated closer to employment hubs/transport connections
- Generally have higher rental yields, increasing chance of a positively geared property
- As an apartment owner, you only pay for the interior of your property – the apartment. All other building maintenance is handled by the strata corporation.
- Much of the value of the property is in the building itself, which actually depreciates over time because buildings have a finite lifespan and need to be replaced or repaired.
- Generally cannot be extended or developed
- Prone to oversupply in highly developed areas
- You need to pay levies to strata corporation to cover maintenance and management
Townhouses, duplexes and villas as investment property
Generally lower maintenance than a house
Some are strata titled, meaning you may need to pay levies to cover maintenance of the building
If you are ready to invest in a property, we hope these top 6 tips help you find the right property for your investment goals. But how to finance your investment property? Call us to find out more about your financing options for your investment property.