How To Select The Right Investment Property
Selecting the right investment property is probably the single most important component when it comes to investing in residential real estate.
Even if every other facet of your investment property is perfect in every way, selecting the wrong property – “A Dog”, a bad/poor performing investment property can set you back years.
Selecting the wrong property as your first investment has the potential to derail your entire investment plan and jeopardise your financial future.
This is especially the first time round. The reason being is that your first investment will become the cornerstone to your future investmenting potential. So it is worth spending the time getting it right, so let’s get on with it.
First thing you have to remember that you are buying an investment and not a home.
The main criteria for your investment property is finding somewhere that will have the greatest likelihood of being fully let 100% of the year. This is vital to help minimize any holding costs associated with your investment property.
In other words we want your investment property to be rented (and paid for) every week of the year.
Finding a property to fulfil this very important requirement may sound complicated and without a system to use to help, it is.
I am hoping that by the end of this series of articles, selecting the right investment property (along with every other part of property investing), will be a little clearer for you and a much more achievable thing than you have thought possible before.
Who Will Live in My Investment Property?
To start with, we have to think of who will be living in our property. Once we have the “who” part of the equation it becomes easier to know the things your prospective tenants (bless’em) will want and need in a property they would choose to live in and rent, what will make there ives easier.
I try and picture a young couple, married a couple of kids, both parents working. What kind of home would these people like to rent?
What type of Locations Should I Look At for My Investment Property?
Close to schools would be a consideration. Good access to public transport, shops and services.
If you can find somewhere within 10 or 15 minutes of the water as well, you will see a higher demand for your property than normal. Australians love the sea and being close to the water, any water. (Read Sea Change by Bernard Salt)
How Much Should I Pay For My Investment Property?
When thinking of how much you need to spend on your Investment, I think of it this way. I tend to stay with averages. Nothing too expensive and nothing too run down (unless you are thinking of a renovation – that’s another topic I will have too cover at a later date).
The reason for this price point is to have a property for rent that appeals to the largest possible percentile of the renting population.
It is impossible to have an investment property that will suit everyone, so when choosing the right property, it is a good idea to select one that will appeal to the widest possible audience.
A run down, older home will be cheap to buy and rent out, but the demand on this end of the property renting market is lower, and you have too also consider the type of tenant you want to attract…
The same is true of premium properties at the top end. Sure they can command much bigger rents, though once again tenants may be in short supply.
The middle ground is by far the safer. There are just more people in this segment of the population, and therefore more people after what you have on offer. Your investment property.
This covers all you need to know about the type of property you are looking for. Knowing what you are looking for puts you ahead of your competition immediately. After all, how can you expect to hit a target if you don’t know what you’re aim at?
In my next article – Part 2 of How to Select the Right Investment Property I go through the process of finding the “Perfect Investment Property” for you.
I call it the “Grind”. It takes some work, though it is a tried and true method that has worked in any property market at any time of the property cycle. This is the way savvy property investors make there decisions.
The Grind is a system for investment property selection that will work for you too.
Have a Great Day
Jamie Wadley – HunterWide Home Loans
