Buying an investment property can be a clever way to build wealth for your future. You can rent short term or long term. There are government incentives that make this form of investment great for mum and dad investors - such as the potential to claim back losses as a tax deduction.
So, how do you go about finding the right property for your needs, particularly if you’re not an experienced property investor? In this article, you’ll find some insights about what to look for in an investment property.
Capital growth is the increase in value of a property over a period of time. Investors use a range of strategies to build wealth, and looking for the properties that are most likely to experience significant capital growth, is often high on their radar.
So, how do you find an investment property with solid capital growth potential? Look for locations and suburbs experiencing economic growth. Economic growth creates jobs, which brings more people to an area, which may flow through to the property market via increased demand for housing. Greater demand means more chance of capital growth.
Next, be sure to choose an investment property that is close to amenities such as schools, shopping centres and public transport – when an area is experiencing economic growth, these properties will be in the most demand.
Some investors choose to focus on properties with a high rental yield, rather than just looking at capital growth potential. The rental yield is the rate of income return compared to the costs associated with the investment property. It’s typically expressed as a percentage, and may be calculated as a gross or net figure. Investors who are following a rental yield strategy will typically look for areas where rents are high compared to the property value.
As an investor, it’s wise to opt for a low-maintenance property. They not only cost less to keep, but they’re less hassle too. Units can be easier and cheaper to maintain than old houses for example, but keep in mind you’ll most likely have to pay body corporate fees.
When choosing an investment property, ask yourself whether there is room for improvement, or ways to add value. You might not renovate it right away, but when you do, be sure to do plenty of research to find out what’s in high demand. Ask your local real estate agents what kinds of property features resonate well with tenants and future buyers in the area.