Looking for an investment property
What to look for in an established property
Buying an investment property is similar to buying a home in that you will consider the location and also the condition of the building. However, when buying for investment your focus should be on who will potentially be renting your property.
Understanding the demographics of the area is key. This will help you determine who your target market is so you can have their needs front of mind when comparing properties to buy. Look at potential properties through the lens of the tenant, rather than what you might like in a home. Buying to suit the needs of the local tenant demographic will ensure you’re marketing your property to the largest pool of potential tenants, this will help reduce vacancies down the track and increase your rental price (the greater the interest, the more competition and the more people will pay).
For example, if you’re buying in an area that is mostly populated by young couples, you don’t want a property that requires too much maintenance. If you’re buying in an area where the tenant population is dominated by young families, you want to make sure that in addition to good heating, air conditioning and a dishwasher your property also offers ample storage and ideally, an outdoor area.
What to focus on when building an investment property
The key here is to not treat the build as if it were your own home.
You don’t want to over capitalise. For example, top of the range kitchen appliances won’t necessarily equate to more rent, so you won’t see the return on your investment. Instead, choose a reliable, cost effective brand where parts are readily available. This will satisfy your future tenants and help to keep your build costs down.
Some build features are worth spending a little more on. For example, high ceilings give the perception of space. A small bedroom can feel much larger when the ceiling height is above standard. Whilst it does add some cost to the build, it also adds to the appeal of your property. Features that will increase demand for your property is money well invested.
Consider the demographics of the area. For example, if you build a huge house expecting to be able to charge a higher rent, but it’s beyond the budget of most local renters it will likely be difficult to lease.
Modern conveniences. Heating, air conditioning and a dishwasher are highly desired. Ducted heating and air con are more prized than split systems, so if a prospective tenant is making an apples with apples comparison between your property and a like property, central heating and air conditioning is preferred.