Investing in property is a sound decision that could open up numerous financial benefits – especially longterm. Whether you’re purchasing a house or an apartment, investing in property can range from small investments, such as a rental unit, to expansive investments like the development of multiple housing units. Regardless of your investment style, there are three different ways to come out ahead when it comes to investing in property: cash flow, appreciation, and tax deductions.
When it comes to cash flow, you can rent out your properties and use the income for something profitable or useful. Appreciation refers to the value of your real estate increasing over time. Finally, tax deductions are available, based on certain rules, from both state and federal governments. So if done correctly, property investment can make you profitable with short- and long-term options.
When investing in property, it’s important to consider two financial goals: generating income now, and achieving capital growth in the future. That is what balance is all about!
Finding an ideal investment property that meets these targets comes down to doing your research and making a careful selection. Thoroughly assess the right location, who your potential renters are and what features will appeal to them, in order to get the most out of your property investment. Let’s look at how to pick a great investment property.
Location, location
The location of your property investment is crucial to both its short-term rental income and long-term capital gain. Consider the local demand for properties in the area, as well as the potentiality of the region to expand over time.
Investigate existing or developing infrastructure, such as: key industries that provide a variety of jobs; and venture into the area’s educational facilities and healthcare hubs, such as hospitals and clinics. Check the shopping, dining and entertainment facilities on offer and public transport options, all of which increase the location’s desirability.
And if you want to maximise your return on investment, considering the potential rental yield is essential. All these aspects make an area attractive to live in and can also influence the area’s capital growth.
Prospective tenants
It’s essential to have future tenants in your thoughts when investing in property. This means taking the time to look into the demographic information of an area before making any decisions. As you contemplate, ask yourself who is most likely to live in your rental property–a family, student, or professional couple? This will help determine which kind of dwelling you want to acquire: a house, townhouse, or unit.
This can influence not only the rental income you will receive but also the potential capital growth you could achieve. For instance, students might be looking for cheaper rent than a professional duo. On the other hand, suburbs located near universities often earn robust capital growth over time. Moreover, detached houses usually experience faster capital growth than units do. So, there is a lot to consider when determining what strategy, objectives and timeline to follow with your investment property.
Investment property features and benefits
Once you’ve identified a great spot and potential renter, it’s time to give thought to the features and benefits they’ll expect. It is pivotal to remember that there is a major contrast between these two terms. Property features can be characterised as things like off-street parking, two bathrooms and perhaps a backyard. Benefits, on the other hand, are the positive aspects that inhabitants share while living in the property, such as its closeness to local amenities and transport links, or an easy commute to the city.
Consider a residential area on the outskirts of a big town where occupations are comprised of commuting professionals, customer service personnel, tradespeople and hospitality staff. In order to achieve success with this type of tenant group, you must evaluate both their needs for benefits and the rental property’s features closely. Doing so will help ensure you make the best investment decision for your situation.
Chances are this is an area suited to families and they’re going to need some very specific features and benefits, such as the following:
Features
- three to four bedrooms
- two bathrooms
- garage
- fenced backyard
Benefits
- access to public transport
- easy transit routes to city
- proximity to schools
- proximity to shopping centres
The features and benefits that a professional couple may require in the inner city, however, might look very different, and include:
Features
- security
- off-street parking
- courtyard, balcony
- views
- gym/pool
Benefits
- proximity to city
- access to public transport
- local café culture and restaurants
Know your desired outcome!
As an investor, it’s important that you go beyond simply selecting any old property. Designing a portfolio with the right properties takes time and planning, but it can pay off in the long run. With the right investment approach and calculated risk management, you are on your way to building a profitable real estate portfolio – one that will help you meet your financial goals.
Investing in property should involve more than just looking for a good deal; it’s about finding the right investment that meets not just your financial goals, but also fits with your lifestyle. We must take into consideration all factors including taxes, insurance, maintenance costs, amenities, and market conditions.
With this kind of due diligence and research, you can be sure to make a sound investment and ensure an enjoyable living experience with your rental property. Of course it could be well worth your while to employ the services of a specialist advisor, like Property Friends, who can work with you to ensure your strategy meets your specific requirements, because one size does not fit all!
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Property Friends is a specialist Property Investment Strategist that provides solutions for people aspiring to financial independence, choices in retirement, or leaving a legacy. www.propertyfriends.com.au (03) 9758 5331
