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10 Features of a Great Investment Property

, by Cindy Knight

10 Features of Great Investment Properties

In a heated property market like ours, we are often asked by Perth property owners, what are some top features to look for when investing in a property. Whether you are expanding your investment portfolio or just starting off fresh, this article will help guide you in making the right decision.

  1. Location, location, location
    Nothing is more important than location. If you get the location right, half your battle is won. Carefully consider the suburb or neighbourhood. This will determine the type of tenants and the vacancy rate. Livability and amenities offered by the Council are important elements that renters will seek out.

  2. Infrastructure development
    The local council will often have plans of proposed developments. Find out if they are building more amenities in the area or if there will be lower priced housing that could increase supply and reduce the price of your property. However, if there are investments in parks, shopping malls, libraries and townhalls etc, it could be worth your while considering the property.

  3. Long-term yield potential
    Warren Buffet “wealth is the transfer of money from the impatient to the patient”. Property investing is a long-term game. Invest and don’t speculate. Make your decisions based on fundamentals and research, not emotion. Buy a property below its intrinsic value in an area that has above average long-term capital growth because the more affluent the demographic living there, the more value they will add through renovations which will manufacture extra capital growth.

  4. Purchase Price vs Intrinsic Value
    Consider the property’s purchase price to its intrinsic value i.e. yield and growth potential. Conduct proper research and use reliable sources of information to help gauge the property price, not only on the particular area but also the street itself. Then consider the area growth potential via infrastructure investments etc.

  5. Land appreciates while building depreciates
    Take into consideration the ratio of land to building. While the value of land goes up over the years, the building per se requires maintenance and depreciates in value. It is the scarcity of land in a particular area that causes property values to continue rising. This is a basic economic rule in property investing. However, this decision needs to be weighed against your cashflow requirements.

  6. Rectifying small flaws and distinguishing from larger property flaws
    Oftentimes, property investors look for a property that they can rent out straight away without investing anything further. While this may be attractive in a short term, you could potentially lose the opportunity of spotting a great purchase if you would just remedy the smaller flaws in a property. That said, check the property thoroughly for larger issues that may crop up – for instance, pool decking that is decaying or rusted nails, roof structural issues, hidden plumbing issues etc. If repairs are taking up months to rectify, this will eat into your cashflow.

  7. Consider socio-economic trends
    There is an increasing number of inter-generational families living together. We are also living longer, getting married later and seeing an increased rate of divorces. This could mean that medium-density apartments and townhouses may prove to be the preferred lifestyle decision in the near future.

  8. Low maintenance
    With FIFO trends in Western Australia, this feature rings true in our local market where tenants are looking for an easy “lock and leave” solution. In addition to the population trends mentioned above, ensuring that the property is low maintenance will certainly be an attractive feature for tenants. Check out our article on What Amenities Tenants Look For.

  9. Schools
    As local public schools are subjected to local catchment areas, when choosing to invest in a property in Perth, you should take into account local public and private schools as well as educational institutions in the area.

  10. Crime rate
    The police department provides a good indicator of crime rates in various suburbs. Suburbs with high crime rates often lend themselves to lower rents and this could also increase the risk of break-ins and repairs to the property.

As property managers, we want you to make the right decision based on your circumstances. Being in the real estate property market here in Perth for 70 years, we have seen Perth property cycle's ebbs and flows over 7 decades. We would highly recommend that you have a buffer in your cashflow so that you are not forced to sell before you are ready to do so. As property is a long-term game, ensure that you cut the cloth according to your size. We cannot over-emphasise on how important it is to be well-calculated and know your financial situation while evaluating the robustness and sensitivity of your investment plan. We recommend that you always build in a contingency plan. Read more on our article: An In-Depth Checklist - Viewing an Investment Property for Sale

If you have further questions, please feel free to reach out to our approachable property management team.

Would you like to know more how we can help? Get Your Free Property Appraisal Today.

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