10 Ways to Choose the Best Investment Property
Choosing the best investment property
Successful property investing, in essence, is about finding the right property in the right location. No doubt, it is a complicated process as it involves a lot of different considerations. The key to successful investing therefore lies in the ability to understand the fundamentals that influence property value. In this segment, we aim to break down these fundamental considerations into ten metrics.
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Choosing the Best Location
1. Proximity to transport, schools, shops and community centres
Proximity to infrastructure and social institutions has a major impact on future capital growth as well as the property’s ability to attract tenants. The ideal location would have shops, transport and community centres within walking distance as well as a good selection of schools in the vicinity.
Whilst it may be difficult to find the perfect location, the more of the above checkboxes the location can tick, the higher the property value. Walk Score provides good data on certain locations and the quantifies the ease of access to shops, transports, etc into a scoring system.
2. Access to Major Employment Hubs
A location could also be made high value by the fact that it is a major employment hub. This could be influenced by the fact that people want to live closer to work. Even where location is not an employment hub, as it is with purely residential areas, it could also be valued highly where it is easy to commute to a major employment hub. For example, many suburbs that have express transport to the CBD are typically more expensive than those that lack this express option.
3. Historical Capital Growth
Looking at a suburb’s historical capital growth could be a reasonable metric for determining value and even growth potential. This could be done by looking at growth for the past 10 years. With that said, it is important to realise that historical performance is never the perfect indicator for future performance. This is especially true in cases of gentrification or where government re-zoning policies come into play.
4. Suburb Vacancy Rate
You could also look at the suburb vacancy rate. This metric gives an indication of property demand and usually, those with high vacancy rates are valued much cheaper.
5. Street Location
Which street the property is actually located could also mean a huge difference in value. Many people would prefer to live in areas where there is little noise pollution for example. Hence, properties in more quieter streets are more in demand than those located next to major roads.
Choosing the Best Property
6. Property Type Considerations
How many bedrooms should your property have? Should you buy a townhouse, house, or an apartment? How many car spaces should there be? All these are relevant considerations. Choosing the most ideal type should be based on local demographics as preferences vary from location to location. For example, people living in more affluent locations may place importance on car spaces as compared to those living in less affluent suburbs.
7. Property Cash Flow
The best property is also one that is consistent with your financial capacity. What this means is that, the financial burdens that the property may bring should not be too limiting. You should know the costs associated with managing and maintaining the property as well as the rental yield.
8. Know the average price for your property type
Compare property price with similar properties around the area. This is to prevent overpaying. Realestate.com.au is a good place to do research on property prices based on location.
9. Property Size
Greater property size would usually lead to greater demand. However, it also means that you have to pay a lot more. Hence it is prudent to spend more for size where the location has relatively high demand.
10. Overall Visual Appeal
Visual Appeal is such an important factor in determining property demand. When deciding on a property, you should choose those that are if not perfect, at least presentable. This is unless of course, you are planning to buy cheap and flip.
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