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The key ingredients to property investing

investment property

An investment property should serve two financial aims: income in the short-term and capital growth in the long run.

But how do you ensure it meets these needs? Well that comes down to research and careful selection that involves analysing the best location, the needs of likely renters in that area and the features and benefits a property should offer to appeal to your target tenant market.

So, let’s dive a little deeper with a brief insight into what to look for in an investment property.

Location, location

The location of your investment property is a factor in both its short-term rental income and long-term capital growth. Things to look for include rental demand for properties in that area, along with how that region is projected to develop over time.

So, for example, areas, where infrastructure is either already established or set to be established, might be factors that you look for, along with key industries in the region that offer diverse employment.

Other things to look for might include educational facilities in the area, health hubs like hospitals and medical areas, and conveniences like local shopping centres and public transport.

These are all factors that make a region desirable to live in and can also play a role in the capital growth of that area.

Prospective tenants

As you consider investment properties, it’s really important to keep your prospective tenant in front of mind. And this comes down to the demographics of a region, which should be researched.

Ask yourself, who is your tenant likely to be – a family, a student, a professional couple? This determines the type of investment property you seek i.e. a house, a townhouse, or a unit.

It also impacts the rent you will receive and the capital growth the property may enjoy. For example, students often have less income, so will be looking for more affordable rent than a professional couple.

On the flipside, suburbs around Australia’s major universities have by and large enjoyed excellent capital growth over the years.

Meanwhile, detached houses traditionally increase in value much faster than units. So, there’s a weigh up here depending on your property investment strategy, aims, and timeframe.

Investment property features and benefits

Once you’ve determined the location and prospective tenant, it’s time to consider the features and benefits that tenant will require.

And there’s a key difference between these two terms. Property features are the attributes a property has, for example, off-street parking, two bathrooms, and a backyard.

Benefits are the positives that residents enjoy while living there, such as proximity to shopping centres and schools, an easy commute to the city etc.

It’s critical to look at both of these when considering the right investment property for your prospective tenant.

Say for example your location is a middle-income suburb on the fringe of a city where the employment industries are commuting professionals, tradespeople, customer service personnel and hospitality workers.

Chances are this 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 aims

As you can see, selecting the right investment property isn’t just about picking any location and purchasing a property. It’s about understanding your financial aims and developing a property investment strategy to meet them.

If you’re ready to start mapping out that strategy, we have a handy guide available here, or alternatively, get the ball rolling with a one-on-one-discovery- session.

Uwe Jacobs Property Strategist

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