Investing in your first property is an exciting time, but also overwhelming. There’s no shortage of information available about what first-time investors should be looking for when choosing the right property.
It’s crucial to invest in the right type of property, as making a mistake or ignoring any hurdles can cost you financially. Successful investing is all about being aware of common investing pitfalls and how to overcome these, to get the best return on your investment. Here are some tips for choosing the right investment property.
1. Find growth areas
Your home is your sanctuary, and there’s always going to be an emotional attachment to the first property you choose to invest in. But when it comes to property investment, letting your heart rule can have you making costly mistakes. Your purchasing decision should include analytical research to get the best outcome for your investment goals.
For this reason, it’s best to begin your search for the right property by zoning in on growth areas. Be on the lookout for areas that are expanding in terms of population and infrastructure. Finding these areas of growth will give you a better chance of earning the most profit. This is why learning how to determine growth areas is vital to finding the right investment property.
2. Invest in familiar areas
Investing in familiar areas means you should get to know your potential investment suburbs as in-depth and just as well as you know the suburb you’re currently living in.
Ask yourself what suburb or suburbs fit your investor profile. This could be restricted depending on your budget, so doing some research into rental returns for the suburbs you’re interested in and can afford. Become an expert in your chosen area by researching everything from vacancy rates, demographics, and capital growth rates. If you can’t find a suitable property or area, you can look to build quality low-cost homes of the plan.
3. Hold out for returns
While markets with great capital growth seem like the obvious investment option, they’re expensive to buy into and just as expensive to hold. When you’re investing for growth, you need to look at the long-term picture.
What’s a popular growth market now may not be a good investment for you since prices are already high and returns slowing. To get the best on your return, look for a more affordable option nearby that is likely to benefit from the ripple effect and become the next booming market.
4. Look for a tight market
Opt for a tight rental market when it comes to vacancy rates. Investing in low vacancy rates significantly limits your chances of an empty property between tenants. A rental vacancy rate indicates how many properties are empty and available for rent out of all the rental properties in an area.
A high or rising vacancy rate often means tenants are in a more favourable position, whereas a low or falling vacancy rate generally means landlords have the upper hand when it comes to bargaining power.
5. Choose low-maintenance properties
Unless you have big plans to add value through renovating, choose a property that is low-maintenance and ready to rent out immediately. Look out for common electrical issues, avoid houses with big yards and pools require more upkeep than properties on a small block with little to no greenery.
Additionally, going green can attract renters due to low costs when it comes to bills. Similarly, investing in a home unit means fewer maintenance costs than investing in a freestanding weatherboard house. For a first-time property investor, choosing a home that is easy to maintain is a wise option.
6. Know what tenants want
Lastly, choosing the right investment property means choosing a property type that appeals to tenants renting in your chosen area. If your local market is comprised up of mostly young families, then a small unit may not be a safe choice even if it is the more affordable one.
It also helps to choose a property that has useful features such as proximity to public transport and shopping centres, off-street parking, or within walking distance to schools. Choosing the right investment location that will remain in continuous strong demand is crucial when choosing the right property for your portfolio.
As a first-time property investor, all your decisions when choosing the right property must be based on sound research and your current financial circumstances. A property is a solid asset with the potential to grow your finances over the long-term, but investing in the wrong property can cost you more than you make.
Factoring in the above tips is one way to start your property search with more success. Instead of looking at a potential property from your eyes and with your own heart, try to put yourself in a tenant’s shoes. And lastly, it is always wise to seek advice from investors and experts in your property market before committing to your search for the right investment property.