Looking to buy an investment property? Top 3 things you must do online first.

Looking to buy an investment property? Top 3 things you must do online first.
Looking to buy an investment property? Top 3 things you must do online first.

For some people the mere mention of “due diligence” can cause their eyes to glass over and throw their arms in the air that it's all too hard. We understand, so we have simplified this sometimes arduous, but absolutely necessary process down to 3 simple steps.

Whether you are looking to purchase your first investment, or on the search to add to your already growing property portfolio these three steps will help you buy with confidence. 

Know the location.

We have more online information at our fingertips than ever before, so while we believe this is one of the most important aspects of property investment it can also be the easiest. Below are some great sites that give you a snapshot of your preferred location.

What you are looking for:

  • Demographic: you need to understand what type of people live in this area. This is especially important so you know the type of tenant you are going to attract.
  • Infrastructure: what facilities are there? Schools, shops, libraries, parks, green spaces
  • Public Transport: is there a train line that you could buy near or would your tenant need to have a car?
  • Planned Developments: Is your property about to be inundated with more development which could put downward pressure on your rental income. If you are looking to buy a house it's good to know what applications are surrounding the house as this will be an issue for any tenants in terms of noise and possible disruption to their street if its an inner-city dwelling.

Plan for the best tenant at the highest rate.

Tenants have lots of choices so make sure your property will stand out. It's no good buying a cheap property if you can’t rent it out for a good rent or it attracts the wrong sort of tenants. 

The last ten years of development boom is now putting downward pressure on pricing especially in this COVID19 world, but the strong properties that meet the below criteria hold their rental value and generally rent out quickly.

  • This is what we advise our clients that tenants are looking for:
  • Walkable public transportation or has car spot
  • Lots of natural light (always know the aspect of the property)
  • Good size master bedroom
  • Functional floorplan - the flow of the property has to be liveable. If it doesn't make sense to you it probably wont to a potential tenant
  • Property outlook - if the property is facing a busy main road, electrical towers, brick walls etc it will be harder to rent
  • Sufficient storage
  • Preferably with an outdoor space

Once you have identified some properties that meet the above criteria then you narrow it down by going through the numbers.

Know your numbers.

Firstly you have to have a budget and you have to stick to it, always. Then, it's about getting the best value for money. Property investment is about making money, so remove any emotional connection you may have to a certain property or area. Once you have chosen an area and identified properties that could fall into your budget it comes down to the numbers.

There is lots of talk about what capital growth and yield makes a good investment. Capital growth is the increase in an asset's or investment's value over time. It’s measured by comparing the asset's current value with how much it originally cost.

Yield is the earnings generated and realized on an investment over a particular period of time. It's expressed as a percentage based on the invested amount or current market value.

A good indicator is if your investment doubles in value every 7-10 years and you look for a gross yield of above 4%. It’s a balancing act getting these two indicators right and will depend on the area and value of your property.  When you find that property that is in a sound location and has features and benefits that will excite tenants you can begin the negotiation process, just don’t go over your budget.

Happy investing.

Penelope Valentine

Penelope Valentine

Penelope Valentine is a Director at Property Alchemy, a real estate agency servicing property investors. She has held senior positions across some of Australia's most well known real estate brands over the last 17 years. Having crafted her experience and knowledge in asset management she now works with a range of property investors to help them achieve wealth through effective property management as well as property sales and acquisition.

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