What makes great investment properties?
When you’re thinking about buying real estate as an investment, there are lots of factors to consider. But essentially, over the long term, a great investment property is one that ticks one or more of the following three boxes.
It’s a property you can keep tenanted
When you buy an investment property, you want to know that tenants will continuously live in it. After all, periods of vacancy mean you’re not earning that all-important rental income or the mortgage payment on the property.
To ensure that you can find – and keep – tenants, you want to look for suburbs or areas that have a high demand for rentals and that don’t have an oversupply of property. Where are you likely to find this demand? Look for areas:
• in which the population is growing
• with access to good infrastructure, such as public transport, schools, hospitals, and shops
• with a low unemployment rate and a diverse employment base
• that aren’t seeing a lot of property development, such as high-rise apartment buildings that may increase supply (and lessen demand)
• with low vacancy rates, which indicate a strong rental market.
With these low vacancy rates, when properties become available for rent, tenants will quickly pounce on them.
What’s more, if you ever decide to sell your investment property, an area’s vacancy rate can impact the sale price you get. Like you, potential buyers will likely pay good money to know that they will enjoy strong demand and continuous tenancy.
It also doesn’t hurt if the property you choose appeals to a wide range of potential renters, from singles to couples and from growing families to empty-nesters and retirees.
It attracts good rent
Of course, it’s great to have good, continuous tenants, but you also want to make sure those tenants are paying good rent relative to the market.
Again, a number of factors can drive up rents:
•when the area’s population prefers renting to buying. A couple of examples of this might be students wanting to rent near their universities or miners renting during the mining boom
•when the average person just can’t a¬fford to buy property in a particular area
•when rental homes in a desired area are scarce
•when access to an area’s services and facilities appeal to the rental population. (Again, think of the university students who want to be close to their schools or elderly tenants who need to be near a hospital.)
It’s likely to grow at a rate equal to or faster than the national average
Like high rental yield, the potential for capital growth is another component that makes an investment property attractive. Keep an eye on suburbs that are anticipating significant economic and population growth; these can be the ones where you have the possibility of making capital gains. It’s a good idea to do some research into potential changes to the areas in which you’re looking to buy, such as residential and commercial property development or alterations to infrastructure, that might impact your property value down the line.
Finding the perfect investment property can be a win-win opportunity: You’ll not only meet the needs of a keen rental market, but also, more importantly, see a valuable return on your investment.
If you’re looking for a great investment property, Allied Investment Group can help. Call us today on 1300 886 149 or request a Free Consultation.