How to work out what type of property to invest in
Starting the search for your first residential property investment can seem like a daunting and overwhelming task – and that’s because it is!
However, there are a few essential questions you can ask yourself to ensure that you start out your search looking for the right investment from the very beginning.
How much should I spend?
Establishing the amount you will invest in your first property purchase is obviously a critical step in the process. This aspect of your plan should include a full understanding of how much income you expect to derive from your investment, and what you anticipate your outgoings will be.
Remember, buying an investment property is not like buying a house to occupy, which is why a successful investment plan must include a provision for potential nasty surprises down the track.
You need to ensure you are prepared and can afford eventualities such as vacancies, as well as planned and unplanned maintenance and repairs to the property.
What type of property should I buy?
Having established the broad location and maximum amount of your investment, thoughts can turn to the type of property in which to invest.
The old adage that it pays to buy in the best location you can afford holds true, but there are others factors to consider also. Buying the worst house in the best street, as we are often advised, might make sense from a capital appreciation perspective, but if you cannot secure a tenant due to the state of the property, this might not be the best overall strategy for you.
Once you have established the ideal suburb to invest in, you should look at the likely demographic of tenant in that area. This will determine the type of property you should invest in, assuming that it is within your reach.
For example, a suburb that caters predominately young single professionals will not likely wish to rent large family-style properties with sprawling gardens. Conversely, young families do not generally wish to rent small, cramped apartments.
Having established your target rental market, your target property should be situated in proximity to amenities that you tenant would value – transport, shopping, parks etc – appropriate to their demographic.
Narrowing your search in this way will ensure that you focus only on appropriate, affordable and profitable investments that will serve you well into the future.
Good luck on your search!