When searching for an investment property it’s crucial that you are aware of all the factors that can affect your investment. An apartment as an investment property can be a significant asset however, this is only so if you know how to get maximum value from your investment. To be a successful investor, one must take important steps even before a property is purchased.
Apartment hunting especially if it’s your first, can be exciting, a little daunting and, if you’re unprepared, it can be easy to purchase a “lemon”. Here’s how to buy an investment property that will give you good returns and capital growth.
Know your stuff
As with most important life decisions, there should be a certain amount of thought and research put in before a decision is made. Firstly, you should research where and what is in demand, and what makes these things appealing. This is in terms of both yourself but more importantly, future tenants. Ask your friends and family, fellow investors and search online for what type of apartments a highly sought after.
Build a list of what people look for when searching for an apartment to live in and use this to help select possible investment properties.
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When it comes to property, location is everything. Without an appealing location, the success of a property can struggle. Tenants look to live in an apartment where they can easily access a whole range of amenities, so it can be assumed that apartments in close proximity to a range of facilities will always be in demand.
Public transport is one of the biggest pulls as many renters won’t own a vehicle and sometimes have limited parking. While public transport is critical, shops, schools and lifestyle options, like beaches and restaurants are also important.
Think about the price
Yes, most properties will advertise a selling price, however you can’t always take this at face value, there’s things you must consider. Before deciding on a property, you must ensure that the price you are paying for the unit is justified and your rental repayments will deliver a good yield. There’s no point paying an extra $200,000 for an apartment that will get the same rental returns as a cheaper property.
Once you are interested in a property, you should ensure it aligns with the median property price of similar apartments in the area. Then to be sure, it’s wise to get an independent property evaluation, to get a fair and unbiased pricing. This means you can be sure you aren’t paying way too much, and you may be in a position to negotiate.
Should you buy off a plan or buy an existing property?
There’s really no straight answer to what’s better, there’s simply too many variables. There are however some things you can do to minimise your risk when considering either option. When buying a new apartment, you won’t have any history on the new building however you can research the developers and builders of the project. Checkout their previous projects and if you’re really unsure you can even ask current tenants of those buildings.
An existing property is a little easier as there will be current tenants in the building. If the building looks, feels and sounds vacant, it might be for a reason. You obviously want to avoid investing in building with high vacancy levels. Find out how long the property has been listed, it’s rental yield and its market history. Essentially, the more you know the better.
Keep future tenants in mind
When viewing a property during inspection, you obviously need to like the property, but you need to view it through potential tenant’s eyes. Storage is a big factor that most renters value, so ensuring there’s adequate storage space is important.
Of course, it’s important you inspect the whole unit thoroughly. Check for damage, turn taps on and look for leaks, asses the natural lighting and similar factors to be sure it’s an appealing apartment. Take photos of all rooms and be sure to document any damage and marks throughout the property.
Finally, you want to ensure that there is a demand or growing demand for apartments in the area. Smart investors choose properties in high demand that will almost always have tenants to help guarantee a solid rental yield. For example, look for any nearby universities or other training facilities with year-round students as this will increase the chances of your property being occupied.
Purchasing an investment property is a huge commitment but also a huge step towards financial freedom. It can be daunting but it’s also exciting. As long as you do your research and remain realistic you are on your way to becoming a successful property investor.