Location Location Location
As the saying goes Location Location Location. Buying an investment property especially falls under this saying. Buy a property in the right location and expect to have a good rental yield, equity growth, and less vacancy periods.
A Common Rookie Mistake by First Time Investors
Most first time investors look for a property in a suburb close to where they live (if not the very same suburb). Usually this is so they can keep an eye on it by doing regular drive byes. Rarely will this be the most effective approach at picking a property. (And as a side note here – remember just because the tenant is keeping the front lawn mowed, doesn’t mean they are not punching holes in the walls inside!)
Reduce the Risk = Sleep at night!
Remember – Property investment is a business with real assets to manage. By purchasing it correctly (see the correct way) you aim to reduce the risks of holding your assets. (So that you can sleep at night, even if you have assets in other states!)
Research
Some of the important characteristics when researching regions to invest are:
Diverse economy with jobs in multiple industry sectors. – Beware of single industry towns! i.e. There may currently be a huge demand for rental properties in a town in the middle of nowhere that has a big mine in operation. The big mine is happy to pay well above market price to house their employees. But… as soon as that big mine decides it’s not viable for them to continue to operate, they close up shop, lay off their employees and the these people will usually move back to where they were from or to where they can now get work. Leaving you with empty rental property that you still have to pay the mortgage on.
Growing Population – if the population is growing in one area more than another than the higher growing area should be the most appealing to an investor. More people means more homes are needed to house the people.
Key infrastructure and facilities that people look for. Look at what’s available in the town you want to invest in. Are there schools close by (day-care, primary and secondary)? Are there shops close by? Public transport? Is there entertainment close by (movie theatres and concert halls)? Are there skate parks, libraries, universities? You get my drift. Your property will less likely be left vacant if it’s in the right location. Tenants like to enjoy being local to all the same places you do, so think about what is in the local vicinity and if you’d be happy to live there yourself.
Demand for property or vacancy rate. Look at what’s currently available to lease in that town and the price. Speak to some of the real estate agents in that area but also speak to the property managers that work in the real estate agents. They will be able to tell you the vacancy rate for properties in the area as well they may be a little more honest than the actual estate agent or developer trying to sell you the property. They are often very willing to help you as if you do buy in their area they would also like to win your business by managing the property for you.
Future business or government investment in area. Look at what business are opening in the area. Big businesses (the likes of Woolworths and Bunnings) do lots of market research in an area before they spend their money and open a store in that area. Chances are if there is a new Bunnings, Woolworths or the likes opened or about to open in that area then it’s a thriving area and money to be made there if you pick the right property.
When picking your next property remember to think about the above characteristics. It’s all about location location location! Contact us at Planning Property Wealth and let us help you find the right property for your needs.