When buying an investment property, you’re looking for capital growth and attractiveness to tenants. Research is without doubt the best way to ensure you achieve both.
Property investors often try and identify the next suburb that is going to experience strong growth. Others go with suburbs that are already experiencing success. Quite often the neighbouring suburbs to the successful suburbs experience the ripple effect but it can take some time to impact and sometimes it does not impact at all if the infrastructure is not available.
The safest method to ensure investment property success is to buy in an area that has a history of consistent capital growth and increasing rental returns.
Databases
Good, reliable and up-to-date data is crucial to effective research. The simplest way to access this kind of data is by subscribing to a comprehensive database like most property professionals use.
Buyers advocates have access to the same databases selling agents and property valuer’s use. After only a few minutes researching our database we can identify how much a property is currently worth, what sort of growth a property has received over the last ten to thirty years, how much a property should lease for, if it’s already leased whether it’s at market value – and its potential value after specific improvements.
Total Immersion
If you don’t have access to a database, total immersion in a suburb is the next best thing.
Driving through an area and visiting the shops and station can reveal a lot about an area. What are the current residents like, are they families, what schools are around and their reputation, are there nice cafes, a gym, a train station, trams or buses, a library, recreational reserves, bike paths and other lifestyle attractions. These are the drivers of demand for owners and tenants wanting to live in the area and will in turn increase capital growth and rental returns.
Right property, right area, right price
Buying investment property in the right location is important but buying the right type of property is equally important.
Should I invest in a one bedroom apartment?
For example, if you buy a one bedroom apartment it does not matter where you buy it. Even in Toorak you won’t achieve much capital growth in the short to medium term. One bedroom apartments are best bought and paid off and used as an income stream not a capital growth negative gearing exercise.
Choosing the right location
Property investors love Richmond. However, consider whether a newly constructed two bedroom apartment in an area where there are already thousands for lease is the right thing to do. Highly unlikely.
Buying a property as close to the CBD as you can is a great idea as land is scarcest there. Again, you need to find the equilibrium between the right asset, the right area and buy it for the right price.
In and around Melbourne over the last 12 months capital growth in some poorer performing areas has been good while some outer suburbs particularly in the north have proven to be sleeping giants.
It’s difficult to accurately select the next big thing in property investment. Some claim to do this but they are more often wrong than they are right. You only hear about when they’re right.
The wrong decision could be your personal horror story
Investment properties are the prize asset class for wealth creation since 2005. We still hear many investors horror stories of buying the wrong type of investment property only to have sold six years later lucky to break even. This should be near impossible if the investment property bought was purchased any time before 2012, six years prior to now.
Finding time to research
With our busy lifestyles it’s hard to find the time to submerge yourself in the all the research you need to do to make a sound investment property decision. Are you willing to risk an avoidable mistake?
It’s hard to hit a moving target
While most buyers understand the need to research, by the time they have enough information to make a decision the market has dramatically moved. Markets have shown this time and time again in recent years. Buyers have to start again and may even find themselves squeezed to a less desirable area.
Property Investment Analysis PIA
At Investment Property Brokers we’ve found that a property investment analysis (PIA) is the most comforting tool we can provide an investor when we’re recommending an investment property. Based on decades of experience and access to specialist data, we input specific information relating to the property and provide the investor with an accurate figure of what they will need to contribute to the property to maintain the mortgage on a weekly basis.
We consider the full range of costs – including the hidden ones that an investor may not be aware of.
No surprises
With a sales and rental data base, a PIA and time well spent personally investigating a property and location there should no nasty surprises.
You should feel like you are entering a purchase with your eyes wide open with all the information you need to make a safe and sound investment property decision.
Contact Justin now and tap into the most effective research before you make your purchasing decision.
