The great Australian dream of owning property has long been the roadmap for couples and singles building their future. Deciding to purchase property is a big step for us all, and if you’re looking for something affordable, chances are that you’ll be researching property outside of your comfort zone, Sydney.
So, if Sydney is out of your budget or if you’re looking to diversify your portfolio, then how do you decide where and what to buy?
In this inaugural blog post from the team at AssetBase, we’ll explore some of the most important methods of research when you’re scouting potential locations for your property purchase.
Location: Where should I look?
Location is a critical factor in determining the success and growth of your investment property. As a golden rule, a property that is close to public transport, community amenities, shopping centres, businesses and popular schools will always be an attractive choice with potential renters.
It’s important to consider what a potential tenant will be looking for in a rental, and you should be researching the infrastructure which is currently accessible or coming within the next few years. It is infrastructure that draws population growth to an area and increases your potential rental pool.
Unit, House, Townhouse: What should I be looking for?
It’s common for our clients to have their hearts set on buying a house when they first start out with investing. Generally, you will find that a freestanding home offers greater long-term capital growth. This is because it is a land-based asset. Effectively, this means that it is the land that appreciates in value over time.
The determining factor when deciding what you should be looking for is your budget.
This helps you to determine what you can afford, as well as what will best suit your needs and your property investment goals.
Townhouses and apartments usually offer a cheaper entry price into the market and commonly offer a better rental yield than freestanding homes. This can be vital to easing up cash flow for investors. Generally speaking, there is a higher rental demand for apartments too, as the price point is more attractive for tenants.
New vs. Old: How old should it be?
Hate reading? Check out our video on Buying Old vs. New Property
Another important part of your research will be calculating if you should be choosing an existing property or buying brand new. Of course, there is no clear answer with this particular conundrum and there are pros and cons to each type of purchase.
An existing property generally lends itself to a larger block size and an established area. There is the potential for investors to renovate the property and add their own touches to it. The downside is that it can come with unforeseen issues like termite damage, water penetration and deteriorating plumbing and wiring.
With newer properties, you have the benefit of the latest fixtures and fittings, as well as the potential to receive a better rental yield and often a more desirable tenant. New properties also allow the option to claim depreciation come tax time.
While there is no right or wrong strategy, this particular question hinges on whether you are a hands-on type investor or an investor that wants a set and forget asset with minimal maintenance.
Time Frame: How long will I hold the property?
I’ve done the heavy lifting on this one and filmed a video: How long should I hold onto my investment property?
It’s impossible to know the future without a crystal ball, which means we don’t know what’s going to happen years down the track. However, it is still a good idea to consider how long you intend to hold onto your investment property for.
When making this decision you will take into consideration your original investment goals as well as your financial position. Both of these factors will have an influence on the term of your investment.
Keep in mind that property investing is a long-term investment and if you sell your property in the short term you may not be able to recover all of your fixed costs.
Vacancy Rates: Are other investors having their properties leased quickly?
If there is a low number of rental properties on the market, then there will be a
If there is a large number of rental properties available and not enough tenants looking to rent, then the opposite will occur – rental prices will fall.
Vacancy rates can also differ slightly from suburb to suburb and they are driven by market conditions. A great resource to help you with this information can be local property managers. With their ear to the ground, they will have an indication for demand within an area and can provide you with some more information about vacancy rates.
There is always more that you can do, but knowing where to look, what to look for, how old the property should be and how long you plan to hold it for give you a great basis to start making more informed decisions when you’re researching property.
We’ll have some more posts out soon all about capital growth, rental return and positive cash flow. Being familiar with these concepts and how to use them in your research will make you a more thorough researcher and an informed investor.
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