How to Choose the Right Investment Property

An investment property should not be selected in the same way that a property in which you may live would be chosen. When it comes to property investment, your decision should be less emotional and more practical – you need to be focused on what will appeal to tenants and characteristics that will help to ensure capital growth.

The right investment property is tenant friendly:

Thinking carefully about prospective tenants, particularly the type of tenant that you want to attract, is imperative when choosing an investment property. A tenant friendly property will assist you to get as much rental return as possible on your property.

So what makes a property tenant friendly and appealing to a variety of prospective tenants? Rental properties that are in close proximity to schools, public transport, shops and services as well as close to the main areas of employment (such as city centres) will always be sought after.

It is also important to think about the characteristics and demographics of the area. For example, are your potential tenants likely to be families? Students? Couples? Single professionals? Based on the likely demographic of the area, you can choose a property that matches the needs of the tenants who are most likely to occupy it.

Carefully consider the type of property…

You may have made the decision to invest in property, but the next step of choosing the type of property in which you will invest can be an involved decision.

Apartments are an attractive option and can provide you with the opportunity to negatively gear and thereby offset your investment. However, body corporate and strata fees need to be factored in as these can quite often be a significant cost that you will be required to pay each quarter.

A new property can provide some impressive depreciation allowances while older, established properties are likely to provide a higher and more consistent income. It is worthwhile doing some research to ascertain the rental prices that are being advertised and achieved in the areas that you favour.

Outside of urban areas, property investors may consider holiday apartments or rural properties. If you are planning to rent such properties out, be aware that the rental income you receive is likely to be seasonal.

Geographical spread…

Many property investors begin with one property but subsequently decide to purchase others, particularly when they are in a position to leverage off the properties that they own. If this is something that you decide to do, it is often a very good idea to buy in different states and regions. The reason for this is so that risk is spread and the blow is softened if one area is not performing as well as you would like.

However, if you are investing in one property and it is your first investment property, you are best placed to stick with an area that you know. With some local knowledge, you have insight into desirable areas and the services and facilities that are available.

Making a selection…

Having done some research, the most fun part of the process comes – searching for and selecting your investment property!

One of the best ways to start a search is by looking online. Narrow your search according to the areas that you are interested in and your price range.

Another good way to be made aware of suitable properties that may come on the market is to register with a number of real estate agents in the area. This way, agents can let you know when suitable properties are listed with them, even before they are more broadly advertised.

Doing your homework and understanding the market is crucial for making the best choice of investment property. Seeking the advice of a qualified and credible professional can of course be useful, but keeping the aforementioned factors in mind will stand you in good stead as you set about choosing the right investment property.

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