13 Jan VIDEO-How to find good investment properties
Investing in real estate is usually all about capital growth, so choosing a property that is more likely to increase in value is the most important decision you will make, so buying at the right price is absolutely critical. Unlike buying shares where the value of a company is transparent, real estate is more difficult to price, this however provides you with the opportunity to acquire an asset below its real market value if you are patient and knowledgeable. The key for you is to do your research, work out what everything is selling for in and around the area and then you’ll discover that soon you’ll become very good at working out what a property is worth – you’ll know a bargain when you see it. Never consider purchasing real estate in an area that you are unfamiliar with, particularly when you are approached by real estate spruikers marketing interstate or offshore properties, many of these real estate marketing companies are paid very high commissions resulting in the price of the property being hugely inflated. If you find a property that you like and are unsure of its real value you can arrange for an independent valuation to be done and once you are armed with this information you can often use this as a good negotiating tool. Whatever you do, never make a decision to buy an investment property based on getting a tax deduction – always focus on making the right investment choice. Ensuring that you have a steady rental income stream is also vital because this cash flow will make the holding of the asset more affordable and provide income. Different classes of residential property – home units, houses and land – can outperform each other over time. For example, vacant land will provide no rental income but may appreciate more quickly if purchased in an area with limited supply. Investing in a home unit might mean less maintenance costs than investing in a freestanding weatherboard house. Some areas offer higher rental yields, but it is important that you do your homework as they often provide lower capital growth opportunities. It is also important that your property suits the demographics of renters in the area. For example, if it is near a university more bedrooms will be in greater demand than a big backyard for kids to run around.