In the market to buy an investment property? RESCU’s Property Expert, John McGrath, gives his very helpful tips on spending your money wisely.
Investing in property is one of the best ways to sure up your financial future, but your choice of property will have a huge bearing on your capital gains and rental returns, so it’s important to choose wisely.
My first few pieces of advice are:
Drive-by investing:
I strongly advocate buying investment properties you can drive past. It makes the vetting process easier if you know a suburb well. Mix facts with feeling: Buying for investment should be a less emotional decision than buying to live in, but you should still let your intuition guide you – if it feels good, you’re probably on the right track.
Discount personal preferences:
Love living on an acreage? Most Australians prefer proximity to the beach and CBD. Love a secluded location? Most of us prefer the convenience of a bus at the door and a short walk to the shops.
Be In Demand
Demand is the crucial overriding factor influencing the capital growth and rental returns of your investment property. Location is a key element in driving demand, so buy a property that will appeal to the bulk of the population, which means:
1.Walking distance to cafes: Cafes are now Australians’ No. 1 choice for social gatherings as our coffee culture continues to grow.
2.Walking distance to shops: Not necessarily to supermarkets, but corner shops enabling residents to buy the necessities close to home.
3.Walking distance to transport: Ensure the commute to work, whether in the CBD or regional commercial hubs, is as easy as possible. Consider these three factors non-negotiable in your search for an investment property.
Finding Real Gems
Depending on your budget, if you can also afford to buy in a location with the following secondary elements then you can substantially maximise your long-term returns.
1.Walking distance to the beach: Australians have an ongoing love affair with the ocean and most people consider the coastal lifestyle to be the ultimate.
2.Within 10 km of your capital city: The bulk of employment is in our CBDs, but regional centres, like North Ryde and Parramatta in Sydney, are also becoming more important.
3.Established suburbs: In my experience, established suburbs with their own unique character grow faster than new suburbs, many of which have a cookie-cutter feel to their architecture and a lacking uniqueness to their social atmospheres.
Once you’ve found your suburb…
When identifying specific suburbs, work out which parts are the most desirable and ‘in-demand’. Rely on the advice of agents, shop owners and anyone you know living there.
A few key considerations are:
1.Choose the better side: One side of a suburb is often considered better than the other despite being equally close to cafes, shops and transport.
2.Avoid main roads: They are usually noisy and achieve lesser capital gains.
3.Get the aspect right: A north or northeast orientation for the main living areas and gardens is best. Nice surroundings: Buy in streets with well-maintained neighbouring properties and avoid buying houses in streets full of apartments.
Property Type
The final factor is property type.
1.The short answer is: buy a house if you can, but don’t consider apartments the poorer choice. While houses have historically achieved better capital gains, the gap is closing – and there is greater rental demand for apartments.
2.Buy the best house you can: Avoid properties requiring a lot of work. If you need to spend more than 5% of the purchase price to make it rentable, look elsewhere.
3.Buy the best apartment you can: Avoid over-supplied areas, apartments with company title or high strata levies, and buildings with less than 70% owner-occupation.
For more information please visit www.mcgrath.com.au