You need to get your investment right and make sure you purchase a place that will suit the potential tenants in the area.
Way too often I get sent a link to a property and asked 'do you think this is a good property to buy for investment ?' with no other background information.
In order to answer this question, here's what you need to know:
DEMOGRAPHICS
You can’t make a sensible investment decision without knowing the demographics of your target area. Demographics tell you who lives there, who is likely to rent homes and what type of property they will be after.
We need to consider the population, median age, education, household income, household composition and tenure.
For example, if you're looking to buy an investment property in an outer-city market where the household composition is predominantly couple families with 2-3 kids, then buying a 1-bedroom apartment there may not be in high demand and you could risk long vacancy periods.
Or, if you're looking to buy a premium home with intentions to rent it out for $1,000 per week but this is a lower-socio economic market, then you may find that the median household income in the area will not support the demand for this type of property, even though the family household composition does.
It's important to consider all of the factors when investing and not just look at a single piece of data. Successful investors spend a lot of time researching everything there is to know about a local area before even thinking about starting the property search.
Future Growth Potential
As with any investment, you want to see the value of your asset go up in value - this is where we look at 'growth drivers'.
One of the important ones for me is population growth. There's no point investing in a region where the population has been declining for the past 10 years, or is becoming an ageing population, with the younger population leaving town for better opportunities elsewhere.
Population also impacts 'supply VS demand' which is another important growth driver. When demand outweighs the availably supply, we usually see a rise in property prices and rent returns, as more people are competing to either rent or buy the same property and have no choice but to offer more.
Large projects (whether it be private or government) also helps support demand in a region, as it provides job opportunities for locals and even FIFO (fly-in-fly-out) workers, bringing more money to the local economy, especially in hospitality, retail and accomodation.
Major infrastructure and highway upgrades have also shown us that this is a major contributor to price growth - we've seen this all across Australia. If a town was once an hour drive away from a major city but with a new highway, it's reduced the travel time to 30 minutes, people are more inclined to explore living out there, especially if the cost of living is significantly cheaper (renting or buying). It's worth the commute.
The above growth drivers are just a few of your basic ones (I could go on for days). You can clearly see how they can all compliment each other and why it's crucial to research of all these data points.
Getting it right
Investing in property still takes more than choosing a city and buying a house or unit. There is a lot more thought that needs to go into getting it right.
How much can you afford to spend?
How do you know you're not overpaying?
Is the property in the right area for the demographic?
Who will be managing your property?
What type of investment loan is right for you?
Do you have a solicitor to help you with the contract?
And so on.....
Are You Thinking Of Investing?
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I hope all of this info has been helpful and wish you all the best on your property journey. Please don't hesitate to get in touch if you have any questions.
Disclosure: The information contained in this blog is our personal opinion only and is not to be taken as financial advice, as we do not know your financial situation. Please speak with your accountant or any other licensed professional for specific advice based on your own personal circumstances. We will not be held liable for any losses.
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