What to look for in an investment property

Buying an investment property can become a powerful source of additional income. Knowing what to buy, how to maximise your investment, and the location you choose will all make a huge difference to your return. We sat down with Brady Marcs team member Dalia Chedid to discuss what to look for, and how to plan a good investment strategy.

Dalia’s advice for her clients always begins with this: “I can’t guarantee if the market is going to go up or if the market is going to go down. No one’s got a crystal ball. Do your homework. Don’t buy on emotions.”

The most important thing for any investment is knowing the ultimate goal. Is it a 5-year or 25-year investment? Are you looking at commercial or residential? What financial resources do you have, and what return is important? Start by discussing your plans with a financial advisor, and create a clear brief and scope. This brief will become the most important information in your property search, and sets the agenda for knowing the key considerations.

High yield investments

A strong yield means that regular income from the investment is high, and finance required is lower. Certain property types and locations perform better for these factors, and offer greater week-to-week stability. A high yield property can act as an additional income stream for a household, and help provide security if circumstances such as employment change unexpectedly.

Capital growth

Capital growth properties may have a lower week-to-week yield, but offer the greatest potential for return in the long-term, whether through re-sale or development. Certain locations traditionally perform better for longer-term growth.

Both investment strategies can be extremely effective, but they depend on your own requirements and resources. It is also important to know whether a property will be a single investment, or whether you are looking to build a property portfolio.

Key considerations

Choosing a location
A lot of value can be added to a property to improve it, or redevelop it entirely — but location cannot be changed, so it is essential to choose well from the beginning.

Specific location
If there is a specific area already in mind, the next step is to research and understand that location in greater detail to find the best value and best opportunities. Exploring the surrounding areas is also a valuable exercise, as in many cases there may be an opportunity that is even more ideal, whilst still within the scope of the original location.

Open location
If the brief has no specific location in mind, then an enormous amount of opportunity opens up. Experience and knowledge cannot be overlooked in this case, with personal experience from past investments – whether from yourself or a buyers agent — becoming a key guiding factor.

Transport
Transport access is universally important when evaluating property, and the more diverse the range of options the better. The transport links to the CBD, recreation, private schools etc, all make the investment more secure with higher demand.

Ongoing expenses
Absolute clarity around additional ongoing expenses is essential to knowing how strong the return will be for a property. Strata fees for apartment blocks, as well as local council rates can vary enormously between different properties. High strata fees will significantly reduce potential profits from the investment. It is also important to know of any special levy being considered in a strata plan, and financial position of the Body Corporate in general.

Future plans for the area
Government projects such as highways and other significant infrastructure projects can greatly impact property values (either positive and negative). Often future plans are disclosed on the public record, but knowing where to look for information is critical.

Timing
One of the most critical factors with investment is finding opportunities in a timely manner and being able to act decisively. Often this comes down to knowing where to look and having the right connections.

Know the market
Making the most of opportunities comes from having an in-depth sense of the market and current trends. This can only come from being on the ground regularly and talking with people – agents, vendors, buyers, and advisors.

Diversify
If you are developing a property portfolio, the best way to provide security is to diversify investments. Market fluctuations in one sector can be offset by strength in another.

Adding value
Capital investment to improve a property can transform an investment and give one of the strongest returns, however it is best to consult with professionals to know exactly what changes will add the most value – and also to evaluate what added value is possible in a potential property.

All of these factors are simply considerations, and the long-term benefit may outweigh the short-term expense. It then comes down to negotiation, investment strategy, and removing as many unknowns as possible.

With any investment property, good management on the ground will make an enormous difference and ultimately prevent lost rental yield. An experienced and proactive Property Manager will know how to keep the property in good condition and what characteristics will resonate well with the market.

If you have any questions related to buying an investment property – whether just starting out or as a seasoned investor – please don’t hesitate to contact our team on 1800 28 77 77 to discuss how we can help.