Purchasing your first investment property can be daunting and exciting at the same time. It is also often the most important purchase an investor will make. The property selection process will dictate whether the buyer will be able to grow her portfolio to a second, third, or fourth investment property.
The selection process is the first and most crucial step to securing a property that will achieve a high level of capital growth and return on investment.
In-depth research is imperative to gaining a compressive understanding of the property market, in order to identify out-performing suburbs and homes. The best investors spend time attending auctions, monitoring sales trends and tracking suburb growth figures to gain an insight into how much they should expect to pay for their properties.
First-time investors should consider properties that have proven historical capital growth patterns. Melbourne areas that have performed well in the long term are the bayside, inner east and inner southeast areas, as well as select suburbs on the north and western side of the CBD.
For investors who feel they have been priced out of the housing market in popular areas, apartments can offer a more affordable solution. Look for apartments of at least 50 square metres in quiet residential locations, with parking and outdoor space.
It may be tempting to purchase a cheaper investment property further away from the city, however the rental demand in these areas isn’t as high and as a result rental properties have a higher vacancy rate. If your property is vacant, you’re left having to cover a larger gap in mortgage repayments than you had intended.
Poor property selection is one of the biggest mistakes a first-time investor can make, because it sets them behind from the very beginning. Often soon-to-be investors approach us with very little knowledge of the local property market. As buyer advocates, we are able to use our knowledge and experience to select the best properties.
Now is a great time for first-time investors to enter the market, as many capital cities across Australia have hit a soft patch.
Sellers are having to vie for the buyers’ interest, providing buyers with the opportunity to negotiate a price that will deliver a good return on their investment.
A well-researched investment property appeals to the rental market, ensuring a strong and consistent rental income for the investor, which will enable an investor to expand her investment portfolio, or use equity to purchase a dream home.
by Lauren Staley, director of Infolio, a buyers’ advocacy and property management company.