LOCATION
Location is one of the most important factors when buying any type of property. When it comes to purchasing an investment property choosing the right location for your investment objectives is paramount. The location of the investment property can significantly impact the potential return on investment.
Choosing how and where to invest can be overwhelming, there is also a lot of media hype and opinions around buying property. A buyers agent is able to help you navigate, develop a strategy and plan best suited for your budget, lifestyle and requirements. We understand the data surrounding suburbs and are able to select desirable locations in strong demand.
Looking at proximity to amenities such as beaches, shops, public transport, schools, cafes & restaurants. Taking a look at the safety of a suburb and how family friendly it is from a rental perspective. What sort of developments and infrastructure are taking place within the area that are creating jobs. Suburbs such as Newcastle, Brisbane, Toowoomba, Lennox Head, Byron Bay, Inner West, Eastern Suburbs, Northern Beaches, Sydney CBD, South West Sydney, Western Sydney have been very popular amongst investors.
Capital Growth
Capital growth is the increase in value of an investment over time. This is determined by multiple factors such as location, infrastructure & developments, proximity to transport, amenities schools and more.
There are multiple ways to seek an investment property with potential for capital growth. As property buyers we are able to research opportunities and assess potential for capital growth, providing you with market knowledge and insight on specific suburbs. Once we put a strategy together and get to know your property goals and objectives, we can then dive into the best investment locations for your personal requirements.
Supply and demand will also have an impact on capital growth. The higher the demand for properties with a lack of supply.
Focus on the long term aspect of a property rather than short term gains. Renovating and adding value can also be a way of manufacturing your own growth within an investment property.
Rental Yield
A rental yield is the measure of income generated by an investment property.
Rental yield is only one of many factors to consider when buying an investment property. A yield is the amount of money you will receive once the property is rented. However, you will need to factor costs such as maintenance, council rates and land tax. A yield is good for making repayments on your mortgage but won’t help you achieve financial freedom in the long term. If you have purchased an investment property and the yield is quite low, you can always implement changes that will increase this yourself through renovations. They don’t have to be major or complicated renovations, I always start with essentials that need upgrading the most such as carpets, repainting, light cosmetic work to the kitchen or bathroom. There are many things you can do to upgrade the aesthetics of a property and make it more presentable to tenants. This is classed as manufacturing your own capital and a great way to increase the rental income.
A yield is calculated by dividing the annual rental income by the value of the property and multiplying it by 100. e.g. If a property is worth $800,000 and generates an annual rent of $26,000. The rental yield would be:
$26,000 divided by $800,000 x 100 = 3.25% yield.
Property Type
This could be a house, apartment or commercial property, although that can largely depend on your budget and property requirements.
An apartment has fees associated such as strata levies and maintenance and repairs, another point to consider when buying an apartment is that you don’t have full control of the asset, meaning you have to seek approval from the strata committee for even minor renovations.
Houses are generally more expensive but can command larger rents and achieve a higher rate of capital growth. With all things considered it is good to look at a few different locations to determine what will work both for your property objectives, lifestyle and budget.
Commercial property can be an incredible investment but is also a greater outlay of finance. A minimum of 30% deposit is required to purchase a commercial property. A commercial asset is a great way to diversify your property portfolio and can provide far greater rental return than a residential property.
If you are interested in purchasing a commercial investment property I would advise that you seek professional guidance as there are multiple types of commercial properties such as commercial, retail, industrial and office space, there are pros and cons for each but this is usually determined by your personal and financial situation.
PROPERTY Age & Condition
The age and condition of the home are another huge factor. This can determine how much money you need to spend on the asset itself. If the house is in poor condition, chances are you will be spending a lot of money on repairs and maintenance which can very quickly add up being a costly investment. The age of the home isn’t necessarily a bad thing, you do want to keep an eye out for houses that are well kept and have been maintained. I always advise an independent building and pest inspection be carried out.
Demand
When choosing to purchase an investment property it is paramount to look at the data. As buyers agents we conduct a complete location analysis for each suburb that we invest in. As experienced property buyers we always look at the percentage of stock on the market and ensure the suburb has low vacancy rates. It is important that the location you choose to buy is in demand, desirable and within proximity to amenities such as shops, schools, infrastructure and transport.
Hiring Property Professionals
I am frequently asked questions around who should I choose to best help manage my investment property. As buyers agents we have a strong network of referral partners that are able to help you throughout the entire process.
If you choose to go it alone I would advise that you do your research when it comes to enlisting property professionals. Talk to a few people from each industry, compare quotes and what services are offered.
Remember, the cheapest person is not always the best and often you get what you pay for. Property management is a prime example, I always look for property managers who are long standing within the area and have great management experience. I find the best property managers are the ones who solely focus on asset management. When searching for a solicitor make sure they are licensed within the state you are purchasing in and focus on property conveyancing. Ensure to always ask a building and pest inspector what their fee includes and exactly what will be examined during the inspection of the property. Austin Buyers Agents will recommend a licensed and experienced mortgage broker to ensure your finance is in place prior to placing an offer on an investment property.
Benefits of Investing in Real Estate
Investing in real estate offers a range of benefits that make it an attractive option for savvy investors. One of the key advantages of purchasing an investment property is the potential for long-term wealth creation. Unlike other investment options, real estate has a proven track record of appreciation over time. As property values increase, so does your net worth. Additionally, rental income from investment properties can provide a steady cash flow, offering financial stability and the potential for passive income. These benefits, combined with the potential for property value appreciation, make real estate an excellent long-term investment vehicle.
How Purchasing an Investment Property can Benefit you
Another advantage of investing in real estate is the ability to diversify your investment portfolio. By adding real estate to your investment mix, you spread your risk across different asset classes. This diversification can help protect your overall investment strategy and provide a buffer against economic downturns. Additionally, real estate investments offer a tangible asset that you can see and touch, providing a sense of security and control over your investment.
Lastly, investing in real estate allows you to take advantage of leverage. With mortgage financing, you can purchase a property with a fraction of the total cost and use the rental income to cover the mortgage payments. This leverage amplifies your returns, as you’re using other people’s money to build your wealth. However, it’s important to note that leverage also increases risk, so it’s crucial to carefully analyse and assess the potential returns and risks of each investment property.
Investing in real estate offers the potential for long-term wealth creation and diversification of your investment portfolio. These advantages make real estate an attractive investment option for those looking to secure their financial future
Contact us today to see how we can help with your next investment property.
