Three Important Factors when purchasing an investment property
Three important factors when purchasing an investment property, to ensure you’re not buying an expensive lemon.
- Purchase a desirable property.
- What is a desirable property?
There is no point in purchasing a property that nobody or very few people want to live in. It could be the best buy of the century, but without a tenant, the property will continue to lose money hand over fist. I haven’t met an investor yet, that is happy when their property is vacant for long periods of time.
- What makes a property desirable?
The three L’s are key to property desirability – Location, Layout and Locality.
Location: Location, Location, Location is one of the most important factors for a tenant. Most tenants are looking for properties close to facilities suitable in the area ie schools, shops, buses, trains etc. Just remember though, they want close, but not too close!
Layout: Here in Qld, we can have very warm summers. Popular rentals in Qld have air-conditioners, or at the very least fans in every room. Another popular want in Qld is outdoor living areas. We spend a considerable amount of our time outside due to our weather being so beautiful for most of the year. Making sure you have a property with fans and outdoor living, will ensure it is more desirable to tenants.
Locality: A property that suits the suburb/locality. If the suburb is centered around university students, then affordable units or share housing is going to be the best and most desirable. There is no point in purchasing an executive four-bedroom property with a pool, that uni students can’t afford, nor will they look after!
- Good capital growth
A lot of investors get hung up on new fundamentals coming to an area. A new hospital or university is always a great thing for an area, however a quick spike in price rise due to this new project will not last forever in a historically underperforming area. Making sure you are buying in a historically good long term capital growth area is a key indicator to good future capital growth.
- Low maintenance property
I suggest steering away from extras that are going to cost a lot to maintain or replace. Things I would avoid are pools, large timber retaining walls, long driveways, sloped yards etc. These items can cost a lot to replace, repair or remove. Those added extras might be appealing to owner occupiers, but as an investment, the less it has, the less you will have to maintain. With investment properties, I recommend the KISS principal, Keep It Simple Silly! Otherwise you could spend your investing time opening up your wallet instead of sitting back and reaping the rewards!
If your investment stacks up to these three key things, you can rest assured you have got yourself a solid investment.