It’s an old real estate cliché, but “position, position, position” is never more true than when selecting an investment property.
The area and style of property in which you chose to invest will determine the type of tenant and level of rent that you will attract.
You must research your target area. You want to know local demand for rentals in that location and whether houses or units are more popular with renters.
Typically, houses are more expensive but will provide better capital growth because of the land component. They are also popular in areas where young families like to settle.
Units are easier to maintain, reducing ongoing maintenance costs, and attract singles and couples who usually prioritise their lifestyle.
Here is a checklist of items to consider when we start the hunt:
- The position is essential – City centres, popular streets, local schools and universities or near hospitals are always popular and command strong rents. It’s also easier to find replacement tenants when occupants move on.
- Check local amenities – Poor access to public transport, schools, employment opportunities, plus positions on noisy streets or below flight paths, will put off potential tenants and adversely affect rent levels.
- Does a house or unit make sense? – Real estate investment is all about building wealth, so your choice needs to be decided by the numbers. Capital growth varies depending on what you buy. Houses perform best because they have land, but they’re usually more expensive. Units can be easier to maintain but will come with the overhead of strata costs. Don’t mix your personal preference with dollars and cents. Focus on your bottom line because this is an investment.
- Listen to the rental market – While money talks so do your target market. The style of property should be based on the demands of renters who want to live in the area. The key here is to understand whether you’re buying a property that is suitable for rent in its area.
- Avoid fixer-uppers – Unless you’re in the construction game and you’ve found an absolute bargain, you want to avoid spending your investment dollars on repairs or structural modifications. Instead, focus on a property with good fixtures in the kitchen and bathrooms. You may need to re-paint, even update a vanity or kitchen benches, but stay away from big-ticket items to maximise your return.