Seven Things to Know About Residential Property Investment

Investment in residential property continues to be popular and recognised as financially lucrative. With a high level of demand for residential accommodation, the unpredictability of the share market and, as a result of the global financial crisis, a lack of trust in banks and financial institutions, property seems a safer and more appealing investment option than many others.

There is much to know about property investment, including the best options for long-term capital growth and the characteristics that represent the best investment. Here we look at seven of these features:

#1:  The relationship between demand and supply determines the capital growth that is enjoyed by a property and its owner. Subsequently, the highest capital growth will occur for properties that are in low supply but have the highest levels of demand. For example, waterfront properties are limited in number but are highly sought after. It follows that properties with absolute water frontage achieve better growth in value than many other types of properties.

#2:  When purchasing an investment property, it is important that you buy at the right price. If you buy at market value or lower, you are in a better position to enjoy strong capital growth.

#3:  It is vital to know the value of a property before you commit to purchase. To this end, it is worthwhile appointing a registered and credible valuation firm who can advise you on sales of similar properties and the value components of the property in which you are interested.

While it is not as detailed as a valuation, real estate agents are also able to provide you with an appraisal which will give you some indication of the value of a property. This should be treated as an indication only as the appraisal of an agent will be based on their knowledge of other properties selling in the same area.

#4:  Undertake your own research but remember that, particularly on the internet, not all sites are authoritative or credible. Having said this, there is some good information that can be sourced from the net that is freely available or for a fee.

#5:  When you are trying to choose an investment property, it is advisable to seek properties or areas which are hard to replicate. It is helpful to buy in areas that have supply restraints (these may include: location in relation to the ocean or the fact that an area is a small geographic region).

#6:  If you make the decision to buy an investment property that is in area at risk of oversupply, try to ensure that your property has a point of difference from others around it. Choosing real estate that is close to transport, schools, shops and social infrastructure can be a good way of making your investment property all the more attractive to potential tenants and more likely to increase in capital growth.

#7:  Carefully consider the demand for properties within an area. In Australia, the population of many coastal areas are increasing, as are the inner and outer areas of Australia’s capital cities.

Property investment can be lucrative and profitable, but there are some important things to know and consider before purchasing an investment property. As well as wanting to make your property attractive to tenants, investors also need to be concerned with the capital growth that they are likely to receive.

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