How to Spot a Good Real Estate Investment

How to Spot a Good Real Estate Investment

Buying Australian real estate is a great way to use your capital to grow your wealth. But, how can you be sure that a property will increase in value or generate reliable income on the rental market? Here are some tips for spotting a good investment property.

 

Whether you’re looking for your first investment property or want to add to your investment portfolio, real estate can be a tricky market to gauge. While it’s true that property is almost always a good investment in the long run, you can run into trouble and risk losing out on future capital gains by selecting the wrong property or buying in the wrong suburb. That’s why it’s important to do detailed research before you dive in to keep on top of all the pros and cons of real estate investing. Here’s how to spot a good real estate investment.

Key Points to Spot a Good Real Estate Investment

 

Neighbourhood considerations

Before you start looking at properties, you’ll need to decide where to start looking. Your first consideration should be whether or not you want to be actively involved in the maintenance and management of your investment. If so, you’ll likely need to choose somewhere close to home. If you’re happy to leave it up to a property manager, proximity won’t be much of a deciding factor.

Once you have that decided, you will need to take into account certain other factors when considering the neighbourhood, in which you want to buy your investment property.

 

Decide on your ideal tenants

The neighbourhood or suburb you choose for your investment property will also determine what types of tenants you’ll be renting to. If, for example, you buy near a university, your tenant pool will presumably be a lot of students. On the other hand, if you buy in an area close to many schools, your tenants will most likely be families.

Another way to go about looking at property investment is to consider dedicating a property to short-term rentals – a property you plan to list for vacation rentals. While the rental income is less consistent than a property available for long-term tenants, short-term rentals tend to be leased at a much higher weekly price. If you choose a property nearby a popular holiday destination or an apartment in a tourist-attracting city, you could make a much higher income.

 

Number of listings and vacancy rate

Though it seems obvious, it’s worth noting that a good real estate investment is one that is continually tenanted. Therefore, before buying into an area, research how many properties are currently listed for rent and the neighbourhood’s vacancy rate. If you find the vacancy rate to be quite high, it could mean that there is a surplus of rental houses for the area’s needs, or that the area is undesirable to tenants. Either way, a high vacancy rate is a sign that the area is not the right place to buy an investment property, both because you will find trouble getting tenants and because you won’t be able to charge as much in rental income as in other areas.

 

Consider crime

Whether short-term or long-term renters, your ideal tenants are unlikely to want to like in a crime hot spot, so make sure you look into local crime activity. Check the rates for vandalism and both serious and petty crimes, and don’t forget to note if criminal activity is on the rise or declining.

 

Proximity to amenities

One of the most influential factors in a neighbourhood for rental investments is proximity to public transport. To find the best possible tenants, you’ll want to buy a home with easy access to buses or trains. You’ll also want to consider the more fun aspects of an area. Take a tour of the neighbourhood to learn about the local cafes and restaurants, parks, gyms, and movie theatres. Where are they easily accessible from?

 

Future Development

Local councils will have information on planned development for the future, so it’s worth enquiring. Future development can have either a positive or negative effect on rental returns, so consider wisely. If, for example, your area has plans for a new shopping center or business hub nearby, this is often a good sign that the region is up and coming. It will also often indicate that job opportunities are coming, so more prospective job seekers will be looking for somewhere nearby to live.

If, however, the property in question is across the road from a park that is zoned for development, you may have trouble finding tenants, not only because the park – the likely drawcard for the house – is disappearing, but because your property will be in a noisy construction zone for many months, if not years, to come. Also, bear in mind that new housing could compete with your property.

 

How to Spot a Good Real Estate Investment | Real Estate Property Selection Tips

 

Choosing a property

Once you’ve decided on the perfect area for your investment, you’ll need to determine the type of property you want to buy. This will largely come down to affordability, though due consideration for the type of rental you are planning to offer should be high on your list of things to think about.

House, unit, or apartment?

There’s a place for houses, units, and apartments in a property investment portfolio.

For investors looking to rent to long-term tenants, houses often offer higher capital growth potential than apartments and units due to the land component. However, it’s worth noting that the rental yield of units and houses in the same area aren’t often that different in comparable properties when you consider the number of bedrooms, bathrooms, and living spaces. For the owner, that means the value of a unit will not be as great as that of a property, but your rental income will be similar.

Apartments, on the other hand, are a far better investment for short-term rentals, especially in capital cities where there is often an oversupply. But if your apartment is located nearby the city’s main attractions, you’ll likely be able to enjoy a high turnover of short-term tenants. Investors looking to rent to long-term tenants should be extra careful when doing their research to ensure their property has a good chance of being consistently tenants.

 

If you’re in the process of buying an investment property, always seek the assistance of a reliable property conveyancer. Jim’s Property Conveyancing has offices in Melbourne and Brisbane and can provide you with comprehensive advice and assistance moving through your property transaction. Please get in touch with our friendly and experienced staff on 13 15 46.

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