Finding the ideal investment property can seem intimidating. Done well, it requires research and an investment in time as well as a financial commitment. But the current market is well suited to buyers so if you’re thinking of investing in bricks and mortar, here are some things you might like to think about.
Buying an investment property requires a different mind set to buying a home to live in. It’s a business decision based on objective data rather than a subjective “feeling”. The property market works in well-documented – approximately 10 year – cycles. Most financial advisors will recommend a long-term investment strategy which means experiencing at least one “cycle” in order to maximise capital growth.
Rather than rushing in to an investment, take time to do your research and wait for opportunities that represent value and try to ensure your property will always hold tenant appeal. The rental market may be tight now, but what if things change? Will your property stand out from the crowd? Does it offer something that other properties don’t?
Realmark Property Management director Anita Percudani believes making an educated purchase starts with doing the research that identifies desirable locations and property characteristics that set up an investor to succeed with their strategy.
The Real Estate Institute of Western Australia (REIWA) agrees that is currently a buyer’s market with more than 17,600 properties for sale including more than 2,500 blocks of land.
“Despite these favourable circumstances, investors should still be looking for opportunities that offer good value for money,” says Mrs Percudani.
“As this will always help increase their rental returns throughout the investment period.”
When researching the market, investors should be mindful of the key characteristics of successful residential property investment.
”It is important to look not just at the rental achievable in this current high market, but also consider the fundamentals relative to the property that will create positive capital growth,” says Mrs Percudani.
According to REIWA, the better investments are generally in places where there is consistent population growth, such as the near city or the rapidly growing regional centres. The built up areas of a town or city where there are plenty of tenants needing rental accommodation are often good choices.
Tenants like convenience therefore investors should always look for proximity to the best amenities: access to main roads and public transport, close to shops, schools, tertiary institutions and other community infrastructure.
The ideal investment location is where demand for rental properties exceeds supply. In the current tight market this is almost everywhere, but it won’t always be the case. Do your homework to gain a long-term view of local conditions. The Australian Bureau of Statistics has census results illustrating areas of high tenancy rates.
Look for properties that are affordable, generally at or around the median price and which have reasonable prospects of good growth in values.
Historical median house price information for suburbs and major regional areas is available from REIWA.
This information is useful to discover patterns in values.
Usually one part of the market will be experiencing high growth rates that eventually influence neighbouring areas, particularly if they have similar characteristics. This ripple effect can be well worth exploring. Are there undervalued houses in a suburb next to one that is currently doing well?
Choosing a property with redevelopment potential can also be worthwhile. An investment property that can be subdivided into smaller lots for home units will be popular with some developers and can bring long term rewards.
Compiled with the assistance of REIWA
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