What do the pro’s look for in a high-performing investment property?
Following our Viva BrisVegas blog we’re breaking down the business of Property Investing into 10 bitsized chunks.
Selecting the best investment property is going to depend a lot on your budget, individual circumstances, and overall strategy. However, there are some key fundamentals that many successful investors look for to help them sift through the dirt and find those diamonds. It really boils down to finding the right property in the right area. Here are some of the top factors the property pro’s look for in a high-performing residential investment:
Choosing the best location
- Close proximity to transport, shops, and schools – This is a basic tenet for investors as it will often have a big impact on future capital growth and ability to attract tenants. Ideally you’ll want to be within walking distance to public transport options and the local shops with a selection of good schools within a few kilometers. Walkscore.com is a good way to compare properties you are looking at.
- Healthy local economy – Is the suburb a commutable distance to a major employment hub (with diverse industry). Is it below the state average unemployment rate or has new infrastructure projects planned or underway?
- Historical capital growth – The 10-year property price (or even 20-year if possible) growth gives a good context of the previous performance of the suburb. Typically 7-10% is a healthy growth rate but this can vary depending on where you are in the country. Keep in mind: past performance is not an indicator of future performance
- Suburb vacancy rate – This gives a good indication of the level of demand for rental properties in the area. Depending on the area a healthy vacancy rate is typically between 2-3%
- Street location – Is the property located in a quiet residential street? Rarely will you see the pro’s buying on a main road or overly “busy” area as the noise & pollution can make it harder to hold onto tenants and sell the property in the future
Choosing the best property
- Property type – This can be critical to getting it right and things that need to be considered are which style of property is most in demand for this area? Houses, apartments or townhouses? How many bedrooms? Are people in this area needing a car space or not? This is where you need to have an understanding on things like local demographics, supply levels, and what trends are occurring. Speaking to local agents can help with this, but don’t solely rely on what they say!
- Property cash-flow – Do the numbers on this property stack up? What will the monthly servicing look like and is it going to have an impact on your lifestyle?
- Shop for value – You’ll need to compare the properties you are looking with similar properties in the area to make sure you’re not overpaying. Realestate.com.au is a good place to do some quick research and see what else has recently sold and is on the market that is similar to the property you are looking at.
- Property size – Size matters, and the experts will often calculate the price per m2 rate to make clear comparisons with other properties they are looking at in the area. This can also help to measure the previous-mentioned criteria. Emphasis also needs to be put on securing well-sized bedrooms with built-in wardrobes.
- Overall visual appeal – Unless you are planning on renovating, looks still matter. It doesn’t have to be perfect, or even good enough for you to live in, but it needs to be presentable enough to attract a respectable pool of tenants and future buyers when it comes time to eventually sell the property.
Let us know your thoughts by commenting on our blog and feel free to give us a call on 0430 227 328 if you have any questions.
by Simon Salotti, Business Development Manager at Divitis Finance