Free Checklist: How to Spot a Good Property Investment Opportunity

| October 17, 2017

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Buying an investment property is a pretty big deal. It’s not just something you jump into and throw all your money at, all optimistic that it’s an easy way to make millions. But armed with the right research, market, budget, timing and advice, making decent money is definitely a possibility. There are some huge opportunities that can come with a good investment property and it’s these opportunities that help to drive capital growth. With owner-occupiers being the biggest percentage of buyers, the demand for property investment is certainly there.

According to Realestate.com, less than 6% of Australians, or roughly 1.3 million people, own an investment property. Buying into an investment property should be about increasing your wealth and securing your financial future.

Want to know how to spot a good opportunity? Here are a few property investment tips to get you started:

Research, Research, Research!

Ample research is paramount if you’re considering investing. You want to understand the market and the dynamics where you’re buying before signing any contracts or leaping into a decision. Find out the projected growth for the location you’re wanting to buy in. You’ll need to look into any new housing developments and essential amentias and infrastructure. Speak to local agents and ask around in the neighbourhood you’re wanting to buy in.

Read property-related articles and talk to the people in the know, such as experienced investors and property agents, in your research stages to ensure all bases are covered. Investing the time to take out proper research can save you thousands in the long-run. Even after you become a landlord or homeowner, you should be regularly keeping your finger on the pulse when it comes to the market. This will guarantee you’re up to date with the latest trends and property market cycles. If you’re looking at new properties, research both the developer and the builder to see what other projects they’ve been involved in.

Do Your Sums

Your investment journey can be impacted by your daily spending and regular income. If discretionary income is low, then you want to find a modern property that yields a higher rent. Cash flow (your holding costs), potential rental income and capital growth all need to be determined. Consider your cash flow for the immediate to long-term future to ensure payments can be made.

Surrounding competition should be taken into your sums as well. Work out how your potential property compares to the market average, to ensure it’s accurately priced. This step is important for your financial planning checklist. Compare to both local and national averages to determine capital growth too.

Conduct a Risk Analysis

It’s never a good idea to go into any investment without conducting a thorough risk analysis first. Even the best investments come with their own set of risks, so make sure you’re comfortable with any that may stand in your way and consider the possible outcomes to manage them. Finding the right balance between financial stability and the day-to-day pleasures of life is a big priority for a smart investment – and it’s a risk analysis against your budget, market and competitors that will assist with this.

Understand the Tenant and their Needs

Before pursuing any investment property, you need to have a strong understanding of the tenants and their needs. This is an important step to securing a property that can offer you a high rental return. Savvy investors will choose a property and its location based on the needs of potential renters. Any property can be classified as investment stock, but finding an investment grade property means you have one with the essential characteristics required by tenants. Some of these characteristics may include:

· Secure location and dwelling.

· Proximity to transport links, schools and other amenities.

· Investment stock in area – risks can come into play when two or more similar properties are sold at once. This can make it slow or harder to find a tenant.

· Low crime rates.

Determine Lifestyle Drivers

Weighing up the lifestyle drivers is a key part of understanding tenant needs and helps you to find an investment opportunity that suits you. The best neighbourhood’s which are desirable to live in and ultimately bring in the best rental returns will have good public transport links, local coffee shops, shopping centres and other local amenities. Larger properties are likely to attract families who will want to be near parks and good schools, so make sure your investment property can tick these boxes. When determining lifestyle drivers, make sure you research the number of rental properties available in the area too – supply and demand is key.

Don’t forget, tenants will always go where the money is. A big lifestyle driver for a good investment opportunity will also come with multiple job opportunities nearby. Avoid picking a one industry-type town because chances are, if the industry goes, so will your rental income.

Author Bio

This article is written by Jayde Ferguson, who writes for Momentum Wealth – a Perth based, research-driven, full-service property investment consultancy dedicated to helping clients build multi-million dollar property portfolios. Catch Jayde on Google+.

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Category: Real Estate, REIT, rental properties

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