What makes a good investment property?

What makes a good investment property?

What makes a good investment property?


POSTED BY John Ireland ON 18 Dec 2020

Once you have made inroads into paying off your home loan, and once you have witnessed your property’s value grow over a five or ten-year period, you may be able to speak to your advisors about purchasing a second property and becoming an investor.

Going by the Sydney market and in particular the Northern Beaches, property is historically an excellent place to invest. Some homeowners have even noticed their houses ‘earn’ more than they do over a twelve-month period.

The upper Northern Beaches (Avalon, Palm Beach, Bilgola, Newport etc) are a particularly good place to invest. There is high demand from tenants and the value of property is holding firm.

However, not all investment properties are created equal! Here’s how to choose a gem.

Location, location, location

When you’re looking to invest, put yourself in the shoes of your ideal tenant. It is more than likely they will be looking for convenience as well as a beach-side lifestyle, so seek out a property which is walking distance from the nearest village and within easy access to public transport.

Your tenants will also want to be close to the beach — the nearer the better! If you can secure a property with views of Pittwater or the ocean, you will find your property more in demand.

When considering location, keep in mind the factors that are deterrents. An apartment directly above or across the street from a pub, for example, may struggle to grow in value. It may also attract the kind of tenants you don’t have in mind. And while proximity to public transport is a good thing, having a bus stop right outside your bedroom window is not! The same goes for street lights.

Price

As an investor, it is important to purchase a property with your head, not your heart!

Work out your budget and stick to it. Create a checklist detailing what the property must have, should have and won’t have so you can shop strategically.

If the property you have your eye on is a total bargain, ask yourself why. Just because it’s cheap doesn’t make it a good investment. It may be that the vendor is in a hurry to move on and wants a fast sale (this is good), or it may be that the property needs extensive work done (not so good).

As with everything in life, you get what you pay for. If you are not willing to put effort and money into a fixer-upper, then don’t go down that path!

With that being said, if you are a savvy investor you will be able to spot the difference between a property in need of a time-consuming, expensive overhaul and one that will increase in value with just fresh paint, new carpets and a basic kitchen upgrade.

It’s always best to have a building and pest condition report conducted. Some sellers already have this available at sale so check whether this is the case before you order one yourself.

You are purchasing your investment for one reason; financial growth. Be aware of the property cycles. You should avoid paying top dollar at the peak of the market as you don’t want the property value to drop and force you to wait years to recover. Pick your timing. In many cases, a buyer’s agent can help you make the right decision on what kind of property to invest in. A buyer’s agent specific to Avalon and surrounding areas can also assist with negotiations to secure the best price for the house or apartment you’re interested in.

Style

That Gothic mansion may appeal to you but will it have tenants lining up to move in?

OK, so there aren’t so many Gothic structures on the Peninsula! But if you are investing in a property which will be rented out, don’t go for anything unusual. Mainstream properties that tick all the right boxes (built-in wardrobes, off-street parking, internal laundry, balcony, en-suite etc) will appeal to the widest pool of tenants.

Size

Consider the maintenance required on the home you are considering adding to your portfolio. A property that will require a lot of responsibility from you as the landlord may end up eating into your profits.

Size matters with apartment complexes as well. If you buy into a sprawling block with 100 apartments, you may find yourself competing with six or seven other properties when it comes time to find tenants. You are better off purchasing an apartment in a boutique complex with only 10 – 12 dwellings in total. This will help your rental listing stand out.

Finally, once you have secured your investment property, you can make it a ‘good’ one for the long term by ensuring it is professionally managed by an experienced team. This will help you find the right tenants, maximise your returns and take the stress out of owning the abode.

Get in touch to find out more about investing in Avalon, Newport, Palm Beach and surrounding suburbs.