Top Five Property Investor Questions Answered
After years of working with thousands of investors, we have put together the five most frequently asked questions. Even if you know just a little about the investment property market, the results probably will not surprise!
What Are The Top Features To Look For In An Investment Property?
- Location: Definitely the number one concern, the location must have strong population growth, low unemployment, good job growth, a diverse economy. A good location, particularly in one of our larger cities, provides a lower-risk investment environment
- Infrastructure: Best if it is already an established area with plenty of desirable infrastructure close by. If gentrification is continuing with more bigger and better infrastructure programs, these always drive price growth
- New: Depreciation is a massive help to cash flow and helps to drive tax deduction. Older properties have little or no depreciation, need more maintenance and are more costly to run. Generally they do not demand as high a rental and are more likely to suffer vacancy.
- Balance between yield and capital growth:A gross yield of around five per cent is a good rule of thumb. This ensures holding costs are manageable and cash flow is manageable. It also gives you a good ‘split’ between capital growth potential and good yield. Normally one offsets the other.
- Slightly above average price point: Property should be no more than slightly above the median or around the middle of the suburb’s price range. This firstly will ensure constant tenancy and low vacancy but usually also assists when you sell as most transactions are around the median level.
Property as an investment class is the preferred vehicle to create wealth. Most would desire that this be as passive as possible. In this case, new properties with high depreciation and low maintenance make this possible.
What should be avoided when buying an investment property?
- Basically for low risk investment, stay away from regional towns but specifically avoid:
- One-horse towns, where economic life depends on one activity
- Older houses with no depreciation
- Expensive features such as swimming pools and heritage-listed properties, as they create problems
- Locations near power poles, factories, and busy roads
- Ensure you buy your property investment where there is a strong demand from owner occupiers, not just investors.
What research should I do to find the best investment property?
Basically have a team of trusted professionals around you will ensure you are supplied with the best research material. You should be prepared to do the following:
- Research the web. Have a look at CoreLogic RP Data, Realestate.com.au, Domain.com.au even Wikipedia.
- Talk to your mentor/adviser. If you don’t have one, phone us now
- Talk to other investors
- Talk to local real estate agents only to find out about the rental market. You’ll find they are hopeless for anything else! (It’s always the best time to buy now in their area and with the best investment in the area which just happens to be in their window right now!)
Ignore the old “uncle Bill syndrome” – the one that always knows! Do not take advice from friends and professionals who do not own investment properties.
