How to Discern Between Profitable and Non-profitable Investment Properties

Those who enter the investment property market invariably do so to make some money and enhance their financial position. Essentially, every property investor wants their investments to be as secure and profitable as possible and to know that ultimately, the properties that they invest in will bring positive financial gains.

Despite having the best of intentions, it is a reality that not all property investors enjoy handsome profits and an increase in their financial position. It is essential that careful research and analysis of options be undertaken and that sound property investment advice is sought, prior to making a purchase of an investment property.Sydney and a number of other cities in Australia offer good potential for wealth accumulation through real estate, but it is only when a person is equipped with accurate information and the best and most relevant advice possible that they are able to make a wise choice of investment property.

What makes an investment property profitable?

Property investors need to understand that the factors that go into the selection of an investment property should be entirely different to the factors that affect that come into play when choosing a home. The choice of an investment property in Sydney (as well as other Australian cities) should ultimately be a commercial rather than an emotional or highly personal decision.

There are a number of essential characteristics that investors should prioritise when seeking an investment property. Because an investment property should generate income for you (in the form of rent paid by tenants) and will hopefully increase in value over time (capital growth), there are a number of vital features that you should seek:

  • Proximity to amenities and services – rental properties that are close to public transport, schools and shops, as well as other services, commonly attract tenants.
  • Proximity to cities and major employers – rental properties that are located within easy reach of cities and in other locations where major employers are situated are sought after. A profitable investment property is most likely to be located near a metropolis as this is where the overwhelming majority of people are employed.
  • Demographic profile – when choosing an investment property, keep in mind that it should match the demographic profile of the area. This means, rental properties that are appropriate for and within the price range of students are popular in areas with a university nearby, while low maintenance homes and apartments may better suit professionals living in large cities.
  • Great employment opportunities – more often than not, profitable investment properties are located in areas characterised by diversity in terms of the industries and types of employers that are featured there. Strongly performing industries and various employment options tend to attract people, many of whom will seek to rent comfortable and good quality properties.

How do you know if a property is not likely to be profitable?

By following guidelines relating to the features and qualities of rental properties most sought by tenants, you are taking positive steps to set yourself up with a profitable investment property. You must also ensure that you buy the type of property (for example: unit, townhouse, duplex, apartment, house) that is most appropriate for your situation and the types of tenants that you wish to attract.

In order to avoid making the mistakes that result in you purchasing a not so profitable investment property, there really is no substitute for doing your research and seeking credible, high quality property investment advice. Through the purchase of an investment property, you are making a substantial financial commitment and it is vitally important that you do the work required to ensure that your investment benefits you and your financial situation.

No potential or actual property investor should embark on the purchase of an investment property without first considering the extent to which a property will appeal to tenants and match with the finances that they have available.

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