While the seemingly endless supply of reno shows on television make property investment seem oh-so-easy, there is a lot more to investing in real estate than rookie investors may think. It’s not simply a matter of checking out a few properties and buying the one that ‘feels right’, it’s a process that requires research.
For potential investors, one of the first things to think about is location. Getting the location right can result in higher rental yields and lower vacancy rates, while also providing the opportunity for capital growth over the long term, overall making the property investment experience as stress-free as possible.
So, how do investors choose the right location? In this post, we’ll look aspects potential property investors may consider to improve their chances of purchasing the right rental property in the right location.
Tips for choosing the best location for property investment
1. Know what tenants want
Before buying in a specific location, check out the demographic it currently appeals to. Find out who is actively renting in the area, and that should guide you to the property type that appeals most to that demographic. For example, a unit in your desired location may be cheapest, but if that area is mostly made up of families, you may have trouble renting out your investment.
Understanding what the target tenant wants from a property can also help in the hunt for the right investment, for example a big backyard, an extra bedroom, or off-street parking.
2. Look for growth areas
Another factor to keep in mind is growth. Again, research is important, as it can allow you to find locations that are primed for growth. Be on the lookout for areas that are expanding in terms of population, the economy, and local infrastructure. Government and council websites often have information on planned projects. It’s also worthwhile checking for any residential developments in the works, such as shopping hubs.
Want some insight into what’s happening in the property market right now? Check out the outlook for property in 2019.
3. Invest where you know
Investing where you know doesn’t mean investing in property down the street from where you live. It means understanding your potential investment location by doing some in-depth research. Checking out everything from vacancy rates and demographics to council spending and capital growth rates could help make your investment decision that much easier.
4. Understand rental return
Sure, negative gearing can provide tax benefits, but the goal should be to find a property that is positively geared. That means looking closely at the expected rental return for the property type and location in question, to then choose an investment that will provide rent that covers all expenses for that property. Look at vacancy rates to find a tight rental market, and check out the expected rental yield.
5. Choose a low maintenance property
Aside from appealing to the renter, an investment property has to be liveable. Choosing an investment property that doesn’t need much work initially, and won’t need much maintenance and repairs day-to-day can help to keep costs low over time. For example, properties with a pool or a heavily landscaped yard will need more upkeep than those without.
6. Leave emotion at the door
When choosing an investment property, it’s wise to buy with your head not your heart. It can be all too easy to get swept up in a property or a location, to then ignore important factors that may affect the bottom line. As an investor, it’s worth remembering that you are not buying a property that you want to live in – you are buying a property that you want to make money from.
Find out more about why you should remove emotion when investing.
There’s no denying investing in property is a big deal. But, it can be made all the easier by doing your ground work. With your investment location locked down, learn what else to consider before buying an investment property.
The material on this website is intended only to provide a summary and general overview on matters of interest. Trilogy is only licensed to provide general financial product advice on its own products and does not consider your objectives, financial situation or needs when providing any information or advice. You should consider whether the advice is suitable for you and your personal circumstances and we recommend that you seek personal financial product advice on your objectives, financial situation or needs and obtain and read the relevant product disclosure statement before making any investment decision. Please note, Trilogy is not a tax adviser and information on taxation benefits is general only and should not be relied upon.