Put simply you need to look for a property that will attract tenants, increase in value and net a high rental yield over time. But how do you find that?
We recommend to look out for these 6 features when searching for an investment grade property.
1. The right location
The first and probably most important thing to look out for is LOCATION.
Buy in an area with low vacancy rates, and high demand for rental properties.
Avoid buying in areas, or property type where there is increased competition, like unit blocks or large scale housing developments where there might be an oversupply.
Assess the suburb’s capital growth over time and whether it will continue to perform well above average due to factors such as population growth, employment opportunities, infrastructure investment or new amenities.
But remember to always search with your head rather than your heart - pick a location that is highly sought after by the tenants and/or buyers, instead of what area you would like to live in.
2. Owner-occupier appeal
As owner-occupiers are the biggest percentage of buyers in the housing market, they create much of the demand and therefore drive capital growth.
At the moment that is exactly what we are seeing in some of the markets such as Brisbane. Owner-occupiers who are driving the market are buying emotionally and are not driven by numbers like investors are.
They are looking for a suburb and a property that meets their family needs so are willing to pay more for a property if they find the right one.
This is why savvy investors buy properties that are desirable to this group.
3. Competitive price
Research well and be informed about the actual value of the property to avoid overpaying. Especially in the current market where owner-occupiers are buying emotionally and driving the prices up.
If you overpay you are already potentially in negative equity. But if you buy well at the start you could grow your equity over time without adding any value to the property through renovations etc.
It’s all about increasing your chances of better financial returns, whichever way you look at it.
Know your numbers to invest safely, so you're ahead from the start, not just when you sell.
4. Point of difference
This could be an elevated block with views, pleasing street appeal and aspect, unique layout, lavish upgrades and finishes just to name a few.
Having something unique about the property will not only make it more appealing to the tenants but also attract more buyers when you're ready to divest.
A desirable property that others want to compete over is likely to get you well over reserve if you sell in the right market.
By this, we mean a safe block, street or suburb and property with security features.
Having a safe and friendly neighbourhood, and secure property, will affect what type of tenants you attract, and in the end the resale value of your investment.
Check for things like safe street parking, fences, gates and bonus features like an intercom and a security system.
Depending on the location and type of property some of these features might need to be installed, so cost this into your purchase if that’s the case.
6. Opportunity to add value
When investing see if there's any room for improvement through renovations or upgrades to add value to your property and make it more desirable to both tenants and owner-occupiers when you’re looking to sell.
This will give you a chance to improve the resale value of your home so you're not only relying on the market for capital growth.
Most builders and seasoned renovators will agree that updating or replacing the kitchen and bathroom is one of the top renovations to add value to your home and provide the best return if done well.
But you have to do your sums and don’t overcapitalise. There’s a fine balance between giving the tenant and buyer what they want and are willing to pay.
These are just some of the features to guide you in selecting an investment grade property. If you’re unsure about your choice and need qualified property investment advice reach out by emailing us at firstname.lastname@example.org or call Edward Reavy direct on 0404 784 864.