An investment property is an asset that can help grow your wealth over the years. Investing in a property can be very exciting, especially for first-time investors. However, choosing the right investment property is crucial because making a mistake can be costly – and not just financially. Here are seven factors to consider when choosing the right property for your portfolio:
What is the best location of the investment property?
The location of your investment is the most critical factor in choosing the right investment property. The best location for you depends on what you hope to achieve with your investment. Before buying a rental property, think about what your goals are for your investment property. If your goal is good capital growth, emerging suburbs should be your target. These suburbs are generally in areas close to the CBD in a capital city or overlooking the beaches. On the other hand, if your goal is to seek a good rental return, you should look into desirable features for tenants, such as a swimming pool, garage, school, shopping centre or park. The renters in different parts of Australia have different demands; for example, many renters in Melbourne prefer being near transport facilities, but renters in Perth prefer to drive and have a garage. You need to choose a location in a market you’re familiar with. Get help from a buyer’s agent who has intimate knowledge of the area you’re considering before you make your decision.What is the condition of the property?
Always work with an independent pest and building inspector to get a detailed report about the condition of the property you’re considering buying. When buying an old property, you usually need to set aside some funds for renovations and repairs. The best thing about a property that isn’t in ideal condition is that you can buy it for much less than the average property of the same size. In properties like these, a minor renovation could add significant value. On the other hand, if the home needs significant remodelling or restructuring that you can’t handle yourself, the cost may eat away what you saved on the price. So, choose wisely.Do I invest in a new unit or buy an established property?
Investing in a new unit and buying an established property both have their own benefits; however, most investors prefer established properties to new ones. By buying an established property, investors benefit from:- Getting tenants immediately to start earning rental yields
- Having a property close to a CBD, as most newer properties are situated on the outer suburbs, due to unavailability of land.
- Data such as comparable sales, vacancy rates, demographic profiles and types of tenants that the place attracts will be available.
- Choosing an investment property that has modern amenities and smart appliances that tenants want. This may help you attract a tenant who is willing to pay a premium.
- Tax write-offs and depreciation benefits. You can get tax breaks on rental advertising costs, council rates, and land tax.
- Lower maintenance overheads. Everything in a new property is under a builder or appliance warranty. That’s why there are lower maintenance costs compared with older properties.
What are the costs of buying an investment property?
You must be aware of the various costs associated with buying an investment property, such as:- Stamp duty
- Conveyancing fees
- Legal fees
- Search fees
- Pest and building reports
- Council and water rates
- Land tax
- Property management fees
- Repairs and maintenance
- Agent fees