How you shop for an investment property can greatly differ from how you shop for your family home. You’re not looking for features for your family to enjoy. Instead, you’re looking at properties from a solely financial perspective.
You have to consider its rentability, maintenance requirements, and future ‘sellability’. While challenging to change your mindset, it can be crucial for maximising your profit potential. Keep these factors in mind when you start shopping in earnest:
The Location
Whether you’re buying property with self-managed super fund money, your hard-earned savings, or a loan, a property’s location can be worth considering. You don’t always want to purchase a high-end home in a prestigious location, knowing you’ll be paying top-dollar.
In contrast, you likely don’t want to buy an entry-level property in a less desirable area that may be challenging to rent out. Aim for somewhere in the middle. Research up-and-coming neighbourhoods that have room to grow. You may then see your investment earn equity with minimal effort.
Maintenance Requirements
Unless you’re willing to be a hands-on landlord, taking care of ongoing maintenance and repair requests, consider the condition of a property before purchasing it. While all rental properties require maintenance occasionally, older homes that haven’t been taken care of can often fall victim to wear and tear more often. You must also consider minimum rental standards in your state, such as:
- Being habitable and safe
- Being clean and suitable for habitation
- Having locks and security devices for reasonable security
- Having an adequate kitchen, bathroom, toilet, and laundry
- Having acceptable plumbing, gas, and electrical services
- Having sufficient natural lighting and ventilation
Property Taxes
Property taxes can vary dramatically from street to street and suburb to suburb. The more ‘desirable’ a suburb is, the higher the taxes often be. However, these neighbourhoods often attract long-term tenants. You must consider whether you prefer reliable, trustworthy tenants or lower taxes. If you choose to buy an investment property with your self-managed super fund, you may be eligible for tax advantages that offset other costs.
Rental Earning
Purchasing an investment property doesn’t always equal profit. Some areas have higher rental potential than others. When you’re deciding which property to buy, calculate any mortgage payments, taxes, and house-related expenses. Allow for future costs and tax increases in your figures. If the profit potential is slim now, it may result in a loss in the future. In that case, exploring properties in an area with higher rent potential might be worthwhile.
Local Amenities
A property might tick all the boxes for you as a buyer, such as affordability and high rental yield, but that doesn’t mean it does for a potential tenant. Look at the local amenities and their convenience. A property near schools, parks, restaurants, and workplaces may be more desirable than one requiring tenants to commute to access amenities and services.
There’s a good chance you’ll be able to earn a significant amount of profit by owning investment properties. However, it’s never guaranteed without research. Ensure your chosen rental property has these important features above to potentially improve your chances of enjoying healthy returns.
