Buying an investment property is not like buying a home. You need to take off your rose-coloured glasses and focus on a property’s money-making potential above everything else. There are several features your potential investment property should possess:
Any renovations that are required before you can get tenants in are coming out of your pocket, so the better condition the property is in, the more attractive it is as a potential investment. Avoid fixer-uppers, even if they are cheaper to buy, because unless you have a renovation team standing by, they will cost you a lot of money and precious time during which there is no rent coming in.
Look for a property that is plain and serviceable, sensibly laid out and with a classic architectural style consistent with the style of the neighbourhood. If the colour scheme is neutral, it will suit most people’s taste and go with any renter’s furniture. A low-maintenance garden, hard-wearing floor coverings and colours that hide stains and marks are all characteristics a good investment property should have.
As in all real estate, it’s all about location, location, location. Make sure the property is close to public transport, schools, shops and public amenities. If it’s not within commuting distance of the city, make sure it is close to a large commercial area where potential renters might be employed.
Ideally, find a property in a suburb earmarked for new infrastructure, such as a major new shopping centre, school, university or new freeway access to the city. It is this sort of area that will become more attractive to homebuyers, and property values and rents will rise accordingly.
At some time in the future, you will want to sell your investment property, so if it is appealing as well as functional, all the better. If it doesn’t have great curb appeal, it should at least be able to be easily spruced up come sale time to attract homebuyers. Quick fixes could include awnings, paving, landscaping, fencing, new appliances and a coat of paint.
Make sure it is the right kind of dwelling for the area’s demographic. In other words if it is an area popular with young couples or students, look at a townhouse or unit. If it is a family-friendly suburb, look at three-bedroom houses instead. A little research on population trends and a drive around the local streets will soon tell you about the predominant demographic.
As well as income, you need to look at outlay, and insurance is one of those expenses you have to have. Make sure the property doesn’t have any hidden insurance liabilities such as being in a high-crime area or a flood zone. Once again, a little research is well worth doing, as it can save you thousands in the long run.
The whole point of property investment is to make money, so it’s important to look at a property as a house and not as a home. Always think with your head rather than your heart and choose a property that’s in the right location, is low maintenance and will generate a continuous stream of rental income.