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With Spring selling season just around the corner, it can be a great time for buyers to find an investment property. However, selecting the right investment property requires careful consideration of several factors.
Capital growth potential
Capital growth refers to the increase in a property’s value over time. To assess this potential, start by looking at median sale prices in your target suburb. Analyse price trends over the past few years and compare that to how median prices have changed over the past 20 or more years. You can also consider any future development plans in the area that may boost property values.
Rental demand and yield
A property’s ability to generate income is crucial for investors, as that money can be used to pay off mortgage on the property. If your yield is higher than your repayments – or at least the interest component – then you might have a positively geared property.
Investigate the area’s rental demand and vacancy rates to ensure a steady flow of tenants. Research median weekly rents and potential growth rates to get a clearer picture of your rental income over time. Aim for a steady, reliable rental income that covers a significant portion of your property expenses.
Strategic location
The old adage “location, location, location” holds true for investment properties. Look for properties that are close to public transport, schools, shops, and amenities. Safe neighbourhoods with positive growth indicators are ideal. Also, keep an eye on upcoming infrastructure projects or developments that could boost the area’s appeal. Typically, the best investment locations are areas where owner-occupiers want to live in.
Property type
The choice between houses and apartments can significantly impact your investment. Consider the target demographic of the area, such as families, students, or young professionals. Typically, houses offer higher capital growth potential, while apartments come with lower entry costs. However, apartments may have additional costs such as strata fees. The key is to match the property type to the location and target tenant demographic. For example, don’t buy an apartment in an area where families want large homes.
Age and condition of the property
The age and condition of a property can affect ongoing costs and potential returns. Newer properties may require less maintenance but offer lower depreciation benefits. Older properties might need renovations but could have character appeal. Always conduct professional building and pest inspections to avoid unexpected surprises.
Property features
Even as an investor, it’s important to think like a potential home homeowner. Look for properties with practical layouts and designs, plenty of natural light and ventilation, additional bathrooms or ensuites and garage or off-street parking. Features such as a home office space or modern appliances and fixtures can make a property more attractive. Consider what features would make the property stand out to potential buyers down the track.
Further questions
What makes a good investment property?
How do I research an area's rental demand?
What type of property has the best investment returns?
How do I determine if a property will be positively geared?
What inspections should I get before buying an investment property?
This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.
