How to Choose an Investment Property
How to choose an investment property
If you’re thinking of buying another investment property this year, or you’re just entering the market, there are some key things you should look out for as you research. Keep reading to learn how to be as prepared as possible as you start your investment property search.
Determine your desired rental yield
There are three factors that make a property a good investment: rental yield, capital growth, and demand. It’s important to balance your desired rental yield with capital growth. For example, a more affordable home in an area that is still developing may return a high rental yield, but the higher yield may be outweighed by the increased risk of buying in the area. Similarly, a low rental yield (below or around 3%) could indicate that your property is in a blue-chip area where you are more likely to make a return on your investment through capital growth. The weighting you give to rental yield versus capital growth will depend on your unique wealth-building goals and risk appetite.
The good news is that on the Central Coast, there is a high demand for rental properties, in both blue-ribbon locations and growth areas. If you are considering a purchase, we can provide a rental appraisal to assist you in your decision making.
Decide on building type
Whether you buy an apartment, townhouse or villa, or detached home, it needs to fit within your budget and help you achieve your objectives. Smaller apartments can be a great way to enter the market or diversify your portfolio, but you also need to keep extra expenses like body corporate / strata fees in mind. The sales agent will provide these figures for you to consider before purchasing. Similarly, an older detached family home may be a great option, but your annual maintenance costs may be higher than those for a new build or an apartment, or it may require renovations prior to leasing it out. The cost of renovating may be used as depreciation, or offset an amount of capital gains tax when you sell in future, so if this is part of your plan, it is worth discussing with your accountant.
Research locations
Once your budget and desired rental yield are calculated, you can start narrowing down which suburbs may suit your investment criteria. A good way to do this is by shortlisting some locations and visiting cafes, shops, and other amenities to get a sense of the community. Most areas of the Central Coast are experiencing rapid growth, and infrastructure such as a choice of schools, hospitals, gyms, as well as natural landmarks such as beaches, bushwalks and parklands will ensure you have a wide pool of interested tenants. Consider who your ideal tenants will be, for example families with children or pets will benefit from having secure fencing, local parks and schools, whereas if you are looking for a single professional or couple, a smaller property with water views and thriving nightlife may be more appealing.
Inspect properties and get ready to buy
Once you’ve decided where you’d like to buy your next investment property, and you’ve gotten to know the area, start looking at some homes to understand what kind of property you can buy. This may show you that you need to explore other areas if your desired property is outside your budget, or you may find that you can get a better deal than you expected. Just like researching locations, seeing as many properties as possible will give you a good indication of what’s worth putting in an offer or bidding on when it’s time to buy.
Beginning your property journey or expanding your portfolio is an exciting time. Whether you’re looking to buy a brand new apartment, or secure a new asset in a regional area experiencing growth, keeping the items above in mind will help to bring you some clarity in your property search. And just like buying your own home, expanding your portfolio is a big decision, so make sure you speak with qualified financial and legal advisors to make sure everything works for your unique situation.
To view our currently listed properties, visit Properties For Sale
For rental appraisals, please Contact Us
Remember, this article is general in nature and is not financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.