There may be no money-back guarantees in property investment, but by keeping the following essentials in mind, you can get pretty close to ensuring good returns.
1. Capital growth potential
The biggest financial gains will always flow from a property’s capital growth potential. Unfortunately there is never a steadfast guarantee that a property will increase in value, but knowing where and what to buy certainly helps.
There are some features that will almost always facilitate capital growth, such as proximity to amenities, positioning in a unique building, a car spot, a practical layout, desirable outlook, good condition and a good price compared with others in the area.
2. Rental return
You want to look for properties from which the rental revenue will cover the cost of holding.
Units or apartments in sought after areas are often good options, as they will generally net a greater yield in proportion to the purchase price than houses.
However, the likely rental return on a property will do nothing to mitigate the risks involved with investing if its vacancy rates are high. Narrow your search to properties in locations with traditionally low vacancy rates which should deliver consistent returns.
3. Keep within your means
Seasoned investor or fresh to the market, buying beyond your means is a Big No No. You’ll only serve to over commit yourself, which is a fast route to investment failure.
You also need to consider the budget of future buyers, since this will affect its market appeal.
For example, top-end properties will have a more limited market, compared to properties in the middle of the market, as will those at the cheapest end of the market.
Make sure the location has the required features – such as migration intake, population size, and multiple industries – to deliver both a safe investment environment and the greatest chance of capital growth.
Population records – specifically growth – can be used to guide where you choose to invest.
For example, it is probably worth avoiding suburbs that are experiencing nil or negative population growth, such as those dependent on one industry.
You also want to consider where the property is located in relation to key amenities, such as schools and public transport – the more convenient your property, the easier it will be to keep it tenanted.
Just because a type of property is of high interest in one area does not mean it will perform on a par in a different one. If your investment is ever to realise its full potential, it needs to cater to the local demographic, whether the residents are working professionals, families or students.
This means the inclusion of a bath in a family-oriented suburb, for example, and minimal garden and yard for students.
Good, quality infrastructure is crucial to a property market’s health.
Look for infrastructure and new projects that will enhance an area into the future, not just temporarily during the construction phase.