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What Matters in an Investment Property

By John Anderson

Property Valuer Expert

Buying an investment property is a big decision that requires thorough research and planning. While there is a level of risk involved in all real estate investments, making well-informed decisions will reduce this risk and ensure you are able to make a profit. One of the most time consuming elements in the process of securing an investment property is determining which property you should buy. There are a number of factors involved in this choice, from the size of your budget to what type of property you would like to purchase. Although the individual circumstances may vary, there are some things which all investors consider before purchasing an investment property.

Location

Location plays a major role in the value of a property. This holds true for investments, and keeping this in mind while searching for a property will ensure you choose a profitable investment.

In regard to location, you must consider both the rental demand, and the long term projection for the property market. If you are planning to hold the rental property for a significant amount of years, rental demand may be your primary focus when deciding on a location. Alternatively, if you are hoping for a shorter term investment, taking advantage of areas where the property prices are expected to surge is the ideal strategy.

In terms of rental demand, it is important to choose a property in an area that attracts renter, as well as a specific location that will make your property in high demand. Things to consider for the specific placement of the property include the proximity to amenities such as transport, shops and schools. Other factors which may impact the ease in which you find tenants is the existence of appealing features, like a good view from the location, or if it is very central.

Property

Of course, the characteristics of the property itself also matter a great deal. First decide what property type you want to invest in, whether residential or commercial. Then pay close attention to the features of the property. If you are investing in an apartment, the overall building should be considered including any additional amenities it has.

Factors such as layout, size and overall condition are all important. If the property is in poor condition you may have to spend money out of pocket for repairs which can reduce your ongoing investment yield. Additionally, the layout of your property could impact the rental demand. For example if the property doesn’t receive enough natural light during the day, has an unappealing outlook from the windows, or doesn’t have an outdoor area it won’t be as easy to find tenants quickly. Don’t overlook this issue just for a slightly cheaper purchase price; being unable to find tenants could mean your property sits empty for months on end while you are responsible for mortgage payments.

Rental Income

While you may think you have found the perfect rental property within your budget, remember to consider the price you will be able to realistically charge for rent. If the potential rental income does not cover mortgage repayments, you will have to factor this extra cost into your investment plans.

This isn’t something you should leave to be a last thought. The level of rental income you are able to receive from an investment property should be considered alongside all other factors during the property search process. The more appealing the location and property itself, the higher the fair rent amount should be.

Price

The asking price of the investment property is naturally the first factor to be considered. Not only does it need to be within the pre-decided budget, it must also fit within the expected range of property sales in the local area. If it is selling for over what comparable properties have recently sold for, it is not a worthwhile investment. If a property is out of your budget, it is advisable to search for more options.

When considering the price of a property, keep in mind that the price named on the property listing may not accurately reflect the current market value of the property. In order to avoid paying more than a property is worth, it is vital to have a pre-purchase property valuation done. An independent, experienced valuer is able to give an accurate market value of your potential investment property by conducting a thorough inspection and comprehensive research into the current state of the market and comparable sales. This insight will ensure you are making a well-informed decision before placing a bid or signing a contract.

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