30 Dec VIDEO-Factors that should influence your property purchase
The factors that influence the purchase of an investment property are much more identifiable than what makes a good home. Look for long-term capital growth, proximity to the CBD and lifestyle amenities, ability to add value and a reliable rental return. There are other factors such as the history of growth and stability, future plans for infrastructure growth and development that will attract increased demand but by and large those additional factors will emerge if you carry out proper due diligence in the areas I first mentioned. Here they are again: long-term capital growth, proximity to the CBD and lifestyle amenities, ability to add value and a reliable rental return. Long-term capital growth is at the top of the list because it’s the most important. You invest to make money; it makes sense to make decisions that will mean you make the most money with the minimum effort. The properties you buy should have the potential to double in value every seven to 10 years. The reason these properties grow faster than others on the market is because the demand will exceed the supply. Properties close to the CBD are in shorter supply than middle and outer-ring locations, so they will always be in demand. But look for the location within the location — it should be close to lifestyle amenities such as cafes, shops and public transport. Also, people who rent in inner-city areas are more likely to wear periodical rent increases because they are there for the lifestyle. Tenants in outer areas, particularly families, might be more sensitive to rent increases. The ability to add value is important as well. Maybe not right away but perhaps you could rent it out for a few years and renovate down the track. When renovating to add value you need to optimise, not overcapitalise. Always consider who will want to live in the property. You want a property that is not only easy to rent out, but is highly desired by quality tenants. That way, you will able to get the pick of the rental market. Although you should think of who will want to rent your property, you should also consider if it will suit the owner-occupier market. Because, when it comes time to sell, you will not want to be limiting your market to investors only.